Senator Eric Schmitt proposes drastic remittance tax increase to 15%

In January 2025, the United States Congress explored adjusting its approach to remittances, particularly under the framework of the Big Beautiful Bill. Senator Eric Schmitt of Missouri publicly advocated for a significant increase in the remittance tax. He announced plans to raise the tax on money sent by immigrants back to their home countries from 3.5% to a striking 15%. This statement was fueled by his belief that the U.S. should not function as a financial support system for the rest of the world. The proposed remittance tax increase reflects a shift from the longstanding U.S. policy that generally allowed for the free movement of money across borders. Traditionally, the U.S. has emphasized free trade and investment, encouraging financial fluidity. However, the tone appears to be changing, with an increasing number of lawmakers considering measures that could restrict or tax these transactions at higher rates. Schmitt's comments included critiques of foreign governments, emphasizing that U.S. taxpayers should not bear the burden of other nations' financial burdens. Furthermore, the Big Beautiful Bill also proposed an additional so-called 'revenge tax' targeting investments. If foreign investors’ home countries impose unfair taxes on American citizens, the U.S. would retaliate by penalizing those investors. This has raised concerns on Wall Street about the potential to dissuade foreign investment due to increased tax burdens and the fraught international relationships such policies could exacerbate. The proposal has sparked debate both in Congress and among the public, with various viewpoints emerging regarding its implications. Some, including Schmitt, argue it is necessary to protect U.S. economic interests and avoid being taken advantage of by other nations. Critics, however, are warning that such taxes could reduce remittances that vitalize economies in developing countries, like Nicaragua, which heavily relies on such funds, about 27% of its GDP in 2024, according to a World Bank report. This would not only affect recipients in those countries but also the broader implications for immigrant families in the U.S. facing challenges due to potential decreases in their remittance practices.