OPINION:
Imposing new taxes on Americans sounds a lot like a Democratic policy ploy. But Republicans in Congress and the red state of Florida are proposing new taxes on immigrants who are transferring funds to family and friends abroad.
Lawmakers should swiftly reject any proposal to establish new taxes on remittances. Once such a tax is in place, it will likely move in only one direction: up.
Rep. Nathaniel Moran, Texas Republican, introduced a bill to apply a government-mandated 37% “fee” on remittances. This, however, is a fee in name only. For all intents and purposes, this is a 37% tax on Americans seeking to remit funds to their loved ones in other countries. The fees collected from this bill are deposited in the Treasury Department’s general fund. Half of the deposited fees are sent to a “Reimbursement Fund,” while the other half is deposited in the “Security Fund.”
The secretary of homeland security can use the Reimbursement Fund to reimburse states for border security expenditures. The secretary can use the Security Fund to deploy technology to detect and prevent unlawful border crossings, install physical barriers, and pay wages and salaries for Border Patrol agents.
While border security is of the utmost importance, expanding the size of the Treasury Department and its capabilities would open Pandora’s box to a laundry list of bureaucratic slush funds that would justify taxing private transactions in the name of safety and security.
Rep. Andy Biggs, Arizona Republican, also introduced a bill to impose a 5% tax on remittances in the name of safety and security.
The most egregious aspect of these bills is that neither one differentiates between legal and illegal immigrants. So the bills impose a new tax on legal immigrants who want to send money back to family or friends. This is an insult to the American dream.
In Florida, misguided proposals to tax remittances are taking shape. Ostensibly to enhance immigration security and bolster safeguards against money laundering, a grand jury in Florida issued a report recommending that the state enact a 1.5% tax on remittances. The report cites Oklahoma law as a paradigm for a new tax in Florida on remittances.
This proposal would also apply to legal immigrants. The state government could rebate the tax collected from the customer, but taking away a portion of the remittance in the first place is a net increase in the growth and power of the state government. Conservatives should vehemently oppose this new tax.
Improving border security and combating money laundering can be achieved without introducing new taxes.
Taxing remittance flows that are serviced by banks, credit unions, or nonbank financial institutions is regressive policy. In 2017, the World Bank wrote a blog post outlining nine reasons why taxing remittances is a bad idea. The post describes how at the time, countries considering a remittance tax included Bahrain, Kuwait, Oman, Saudi Arabia, the United States and the United Arab Emirates — strange bedfellows indeed.
According to the World Bank post, “taxing outward remittance flows” is a terrible idea because “taxing remittances amounts to double taxation for tax-paying migrants.” Taxing remittance flows, it said, also affects poor families disproportionately. Not to mention that a remittance tax “is unlikely to raise enough funds and will also directly tax many Americans.”
There are other ways to defend the border from illegal crossings without expanding the federal government and imposing new taxes on international money transfers. Sen. Ted Cruz, Texas Republican, has continuously been a staunch advocate of defending the border and holding illegal immigrants accountable.
Mr. Cruz has proposed several pieces of legislation and policy proposals to solve the border crisis without introducing new taxes for Americans. And the Republican-backed Secure the Border Act of 2023 does not impose any new taxes and has already passed the House of Representatives.
Enhanced border security can be achieved without introducing new taxes that will give the IRS and state agencies a new avenue to audit individuals and small businesses.
Lower taxes and improved border security is a platform worth pursuing. Lawmakers would be wise not to introduce new taxes heading into an election cycle.
• Bryan Bashur is director of financial policy at Americans for Tax Reform.
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