Introduction
The proposed 5% tax on remittances sent by undocumented migrants in the United States has sparked concerns about its economic consequences for Mexican states. According to BBVA Research, Tamaulipas, Guerrero, Puebla, Oaxaca, and Veracruz are among the states that would be most affected.
Remittances and Their Importance
In 2024, Mexico received approximately $62.5 billion in remittances from its citizens working abroad, with a significant portion being sent through formal remittance companies. The cost of sending these remittances ranges from $5 to $10 for amounts between $300 and $500. If the proposed tax is implemented, the cost to send $350 would increase from $6 to $23.50.
BBVA Research Analysis
Using a baseline scenario without changes in remittance patterns or resorting to informal alternatives, BBVA Research estimates that 50% of total remittances ($31.25 billion) come from undocumented migrants. The distribution of the 4.1 million affected individuals is based on consular registrations by the Institute of Mexicans Abroad (IME).
Under these assumptions, the impact on Mexico from a 5% tax on remittances sent by undocumented migrants would amount to $1.563 billion by 2026.
State-by-State Impact
The states projected to experience the most significant monetary impacts are Michoacán ($147.5 million), Guerrero ($146.6 million), Oaxaca ($124.8 million), Puebla ($122.8 million), and Guanajuato ($121.3 million) in reduced remittances.
The proportional impact on total remittives received is observed in Tamaulipas, where remittances are projected to decrease by 4.4% by 2026, followed by Guerrero (4.3%), Puebla (3.6%), Oaxaca (3.6%), and Veracruz (3.4%).
Local Effects
Remittances account for 4.1% of Aguascalientes’ Gross Domestic Product, which totaled $958.2 billion in 2024. In this context, remittances can constitute up to 30% of household incomes. For a family earning $10,000 pesos monthly, approximately $3,000 comes from remittances.
In Aguascalientes, the most vulnerable municipalities to the proposed tax aren’t necessarily those receiving larger absolute amounts but rather those where more households depend on these transfers. Calvillo, El Llano, San José de Gracia, Asientos, and Rincón de Romos are the most vulnerable municipalities.
Possible Solutions
Experts suggest that solutions to circumvent this tax will primarily come from migrants themselves, who will seek alternative methods for sending money and avoiding the tax. While these actions may be individual, they could partially mitigate the impact. However, the ability to absorb this tax will vary depending on each family’s income level, as not all can maintain the same amount of remittances.
Key Questions and Answers
- What is the proposed tax on remittances? A 5% tax on remittances sent by undocumented migrants in the United States.
- Which Mexican states would be most affected? Tamaulipas, Guerrero, Puebla, Oaxaca, and Veracruz.
- How much would Mexico lose from this tax by 2026? Approximately $1.563 billion.
- Which states would experience the most significant monetary impacts? Michoacán, Guerrero, Oaxaca, Puebla, and Guanajuato.
- How would remittances impact local economies, specifically in Aguascalientes? Remittances can constitute up to 30% of household incomes in Aguascalientes, making vulnerable municipalities those with higher proportions of households dependent on these transfers.
- What are the possible solutions to this tax issue? Migrants will seek alternative methods for sending money and avoiding the tax.
