TAX ON THE POOR

Just as America's imports have grown faster than its exports, widening the trade deficit, remittance outflows from the US have increased more rapidly than inflows

- Hippolyte Fofack

US President Donald Trump seems intent on filling America’s coffers at the expense of other countries and the world's most vulnerable people.

In addition to foreign-aid cuts and steep tariff increases, the administration’s One Big Beautiful Bill Act has introduced a new 1% tax on remittances from the United States that are funded by physical instruments such as cash, checks, and money orders. This “tax on the poor,” as Mexican President Claudia Sheinbaum refers to it, will impose severe economic and social costs on developing countries.

The amount of money sent by migrant workers to family and friends in lowand middle-income countries (LMICs) has increased more than 17-fold over the last three decades, reaching $685 billion in 2024~ more than official development assistance and foreign direct investment combined. Remittances now comprise at least 3% of GDP in more than 77 countries and far exceed the World Bank Group's annual lending to developing countries ($128 billion) and the IMF’s total outstanding loans (around $145 billion).

This immense growth signifies a fundamental shift: remittances are now the most direct and dynamic link between migration and development, serving as both a source of foreign-exchange reserves and as a macroeconomic stabilizing force in LMICs. Trump’s new 1% tax threatens to undermine these global gains and further increase the opportunity cost of brain drain.