Donald Trump says he wants to tax remittances — money sent from the U.S. to families back in the old country — and renegotiate trade deals to pay for the wall with Mexico.
This long articulated Trump idea is being treated as if it were some crazy idea but a tax on money sent from Oklahoma to Mexico and Central America suggests that such a proposal is possible and has long bipartisan support.
How much money we talking here? A lot as this chart makes clear.
— RevolutionReport (@RevolutionReprt) April 5, 2016
This isn’t that hard to figure out.
So we can tax items bought at a store but Obama says its impossible to tax a wire transfer to Mexico. sigh https://t.co/HKrYWhGZ7h
— Tom Anderson (@Tom_TJ_Anderson) April 5, 2016
$24B in wire transfers, money cards was sent to Mexico last yr https://t.co/mj0frQgIKF That's how we pay 4 the wall; tax wires to Mexico 90%
— Ann Marie (@Political_QRM) February 24, 2016
In a 2005 study the World Bank pointed out that worker remittances to Mexico from around the world grew rapidly from 1998 to 2003 and by 2003 had become Mexico’s second-largest source of external finance after oil, which isn’t doing so hot with the collapse in oil prices. Remittances peaked at $26 billion in 2007, according to the Bank of Mexico. and still account for between $21 billion or so every year.
This isn’t counting all that money from the Caribbean, Asian or Central American countries.
Investor’s Business Daily editorial page wrote in July 2014 about how taxing remittances — that is money sent home by illegal or legal immigrants — could be used to offset the costs that immigration brings. They pointed out how the Obama administration was making it much easier for illegal immigrants and legal immigrants to send money out of America.
Immigration: To stem illegal border crossings, the government once made it harder and costlier to wire cash back home. This administration makes it easier and cheaper.
“People should not have to resort to mailing cash in an envelope or delivering money in person,” argued Obama’s consumer credit cop, Richard Cordray, in a recent speech to a Latino immigrant-rights group.
So among other things, he’s putting an end to “hidden fees” that he says banks charge immigrants to wire funds.
“Consumers sending $200 from here to El Salvador might find they pay anywhere from $8 to $33,” the Consumer Financial Protection Bureau chief whined.
But if they’re breaking U.S. immigration laws, why help them use America as an ATM, along with the corrupt Third World kleptocracies that send them here?
Instead, the feds ought to tax such transfers and use the revenues to pay for the free services that we provide Salvadorans and other illegals. Better yet, use the money to beef up border security.
Why are we subsidizing migrant workers only to see them ship their excess cash out of the country?
Think about it: Illegal aliens have money to send home because they don’t have to pay for the services that American taxpayers provide them.
On average, they send $300 back to Latin America each month while U.S. taxpayers cover their health care and other costs.
Last decade, millions of immigrants blew off their mortgage payments to remit funds south, fueling the mortgage crisis. Yes, they got home loans despite having thin or bad credit and no Social Security numbers.
More, Central American remittances — which now total in the billions each year — prop up some pretty bad regimes in our hemisphere. In fact, some are among the most violent and corrupt in the world — veritable human-rights disaster areas.
The communist thugs running El Salvador have become addicted to U.S. remittances, which account for a whopping 17% of their economy.
Along with Guatemala, Honduras and Nicaragua, El Salvador is even more dependent on immigrant cash transfers than Mexico.
The Salvadorans’ reliance on remittance revenues obviates the need to create jobs that would keep their poorest citizens from hopping death trains bound for the U.S. border.
The multibillion-dollar influx from America lets these poorly run nations spend less on education, health care, infrastructure and other critical needs.
It also lets corrupt oligarchs divert more funds to their pockets. They just get richer as the poor wait on their remittance deposits.
As long as the Estados Unidos provides such a convenient relief valve from internal political pressure, they have little incentive to reform. In fact, the worse they run their countries, the more their citizens escape north and wire home cash; and the less they have to worry about mass revolt.
Taxing remittances would dry up what amounts to unauthorized foreign aid to these banana republics and pressure them to change their feudal systems. It would also slow their drug trafficking, in addition to their human trafficking.
Oklahoma shows that such a tax can be effective.
In 2009, the state imposed a 1% tax on money wired out of state via Western Union and other cash-transfer outlets. Legal residents and citizens can apply for refunds when filing state taxes; so if you pay your state taxes, it doesn’t cost you a cent.
If you don’t pay taxes, if you’re here illegally, you’re going to help pay for the burden you’re putting on American taxpayer-backed public service as well as help fund anti-drug enforcement.
Judging from the tens of millions in revenues and the howls that it’s raised south of the border, the tax is working. Mexico City’s pols slammed it as “discriminatory and immoral.”
In 2007, The Los Angeles Times wrote an article quoting a Democratic state senator from Dallas who wanted to tax remittances to Mexico and even pushed
“Why should illegal immigrants, who by virtue of being in the country have broken the law, be able to get the same state services as a citizen?” asked state Sen. Royce West, a Democrat from Dallas who is proposing one of several measures to tax remittances to Mexico. He said his legislation was one way to raise money for healthcare programs.
Texas legislator proposing bill to charge 8% tax on money sent out of Texas using wire transfers. He says $6 billion sent yearly to Mexico.
— Ed Joyce (@EdJoyce) November 13, 2010
Internationally this taxation happens fairly often.
In Korea the government taxes money from paychecks to offset the cost of the Americans teaching English. They give you some of that money back when you go back to America.
Changing the behavior of the companies controlling the follow of money will probably change the flow of immigrants into America.
Even the New York Times discussed how much Western Union had helped illegal immigrants and change America’s politics in 2007.
To glimpse how migration is changing the world, consider Western Union, a fixture of American lore that went bankrupt selling telegrams at the dawn of the Internet age but now earns nearly $1 billion a year helping migrants across the globe send money home.
Migration is so central to Western Union operations that forecasts of border crossings drive the company’s share price. Its researchers outpace the U.S. Census Bureau in tracking migrants.
Long synonymous with Morse code, the company now advertises in the United States in languages like Tagalog and Twi and runs promotions for celebrations as obscure as Phagwa and Fiji Day. Its executives hail migrants as ”heroes” and once tried to oust Representative Tom Tancredo, a Republican of Colorado, because of his push for tougher immigration laws.
”Global migration is the cornerstone of how we’ve grown,” said Christina Gold, chief executive of Western Union.
With five times as many locations worldwide as McDonald’s, Starbucks, Burger King and Wal-Mart combined, Western Union is the lone behemoth among hundreds of money transfer companies. Little noticed by the public and seldom studied by scholars, these businesses form the infrastructure of global migration, a force remaking economics, politics and cultures across the world.
Last year migrants from poor countries sent $300 billion back to their home countries, more than three times the world’s foreign-aid budgets combined.
Western Union’s dominance of the industry casts it in a host of unlikely new roles: as a force in development economics, a player in U.S. immigration debates and a target of contrasting attacks.
Its unparalleled reach gives millions of migrants a safe way to transmit money, and may even increase the amounts sent. But critics have long complained about its fees, which can run from about 4 percent to 20 percent or more. And company lobbying for immigrant-friendly laws has raised the ire of people who say it profits from, or even promotes, illegal immigration.
Western Union tracks migrants so closely that it has made pitches to illegal immigrants just released from detention camps.
After settling a lawsuit that accused it of hiding large fees, Western Union set out to recast its image, portraying itself as the migrants’ trusted friend. Over the past four years, it has spent more than $1 billion on marketing, has selectively cut prices and even charged into U.S. politics, donating to immigrants’ rights groups and advocating a path to legalization for illegal immigrants.
While some migrant groups remain wary, the company has won unlikely praise.
”Western Union has become a company that values and protects its customers,” said Matthew Piers, the Chicago lawyer who sued the company. ”Nobody was more surprised at the change than me, because I was Western Union critic Numero Uno.”
Western Union’s attempts to capture the attention of migrants can be seen in a government office in Manila, where a half million Filipinos a year wait to have their papers processed before leaving for jobs overseas. Everything in the waiting room is labeled ”Western Union”: the backs of the chairs, the tops of the desks and the front of the menu in the adjacent cafeteria.
The Philippines requires each outbound migrant to attend a pre-departure seminar. Western Union, for an extra fee, gets something even more valuable than yellow walls: a chance to offer instructions on sending money home.
The sessions are conducted with ”the basic idea of seeking out Western Union when they go abroad,” said Steve Peregrino, the company’s marketing director in the Philippines. In and around the waiting room, reviews are positive.
Ernald Vincent Mendoza, a restaurant supervisor in Saudi Arabia, dismissed the argument that the company’s pricing took advantage of the poor. Though banks are cheaper, the money can take a week to arrive, he said, while Western Union sends it instantly. ”If they have good quality and service, you have to pay for that,” he said.
Emmanuel Ellorian, a waiter in Dubai, said Western Union agents came to the hotel where he worked and processed the transfers there. ”If any of the Filipino clubs have an event,” he said, ”one of the sponsors is Western Union.”
Western Union’s founders set out in 1851 to build the first telegraph giant. A decade later, they had linked the coasts, a feat celebrated in a Zane Grey novel and a Hollywood film, both called ”Western Union.” Airmail and faxes left telegrams obsolete, and the company went bankrupt in 1992.
It re-emerged two years later as a money transfer company – it had been sending cash since 1871 – and was acquired in 1995 by the Colorado corporation First Data. Flush times followed. Fueled by the sharp increase in migration, international money transfers were growing by 20 percent a year.
In 1998, Piers sued the company, alleging that Western Union and a rival, MoneyGram, had deceived customers with advertisements like ”Send $300 to Mexico for $15,” since the companies typically made much more (in this case an additional $25) by setting foreign exchange rates to their advantage. While denying any wrongdoing, the companies paid millions to settle the case.
Western Union appeared ”money-oriented” and ”cold,” warned an internal marketing document that called for a more empathetic image.
The goal, as one plan put it, was to capture a ”share of mind” and a ”share of heart” to preserve a ”share of wallet.”
Having once stressed efficiency (”the fastest way to send money”), Western Union now emphasizes the devotion the money represents. One poster pairs a Filipino nurse in London with her daughter back home in cap and gown, making Western Union an implicit partner in the family’s achievements. ”Sending so much more than money” is a common tag line.
The company sponsors hundreds of ethnic festivals, concerts and sporting events, from cricket matches for Indians in Dubai to sack races for Jamaicans in Queens, New York.
Western Union boasts of 320,000 locations worldwide. Many agents are large organizations, like the Chinese postal system or grocery store chains. (About 60 percent of Western Union’s person-to-person transfers occur wholly outside the United States.)
A survey in 2006 by the Inter-American Development Bank found that illegal immigrants made up about 40 percent of the Latin Americans in the United States who used money transfer companies.
Western Union says it does not know what share of its customers are illegal immigrants, but at times it has made pitches directly to them.
As Central Americans increasingly came across the Texas border in 1999, an overflowing detention center bused them to a homeless shelter in Brownsville, Texas. Western Union sponsored a lunch there, dispensing T-shirts, bandannas and fliers in Spanish with the company’s toll-free telephone number.
Western Union also held marketing events around the same time for people deported from the United States to Honduras and El Salvador.
”They would arrive in a special holding area, and we would have an agent in there – a young lady in tight jeans, tight T-shirt” to promote Western Union products, said a former company official who spoke on the condition of anonymity.
”We knew that within a week they would be back on their way to the U.S.”
Fred Niehaus, a Western Union vice president, said, ”I can tell you that’s something the company would not do now.”
Western Union’s views on immigration have brought conflicts with Tancredo, the Republican congressman who represents the Denver suburb where the company has its headquarters. Three years ago, when Tancredo, a fierce critic of illegal immigration, proposed taxing the money that migrants send, First Data formed a political action committee to drive him from office.
”We’re tired of his antics,” Niehaus told the newspaper The Rocky Mountain News. ”We’re opting for change.”
After winning re-election, Tancredo attacked Western Union for co-sponsoring a Spanish guide that he said promoted illegal immigration.
Seems pretty obvious that if you want to pay for the wall you should start with Western Union.