by Ernesto Castañeda, PhD. Director of the Immigration Lab, American University
Policy brief presented at the Dirksen Senate Building on May 21, 2025.
It bears repeating that immigrants are an integral part of America’s past, present, and future. They are members of local communities. Immigrants are parents and grandparents of many U.S. citizens. Most have been here for years and are part of mixed-status families, where one or more members may be out of immigration status. Immigrants, including undocumented ones, are crucial to the U.S. economy. Most of what immigrants earn is spent on rent, groceries, services, and transportation.
In the current text of the “One Big, Beautiful Bill Act,” there is a provision to tax remittances by 3.5%. Remittances are the money that immigrants, with or without authorization, send to their families in their place of origin. Remittances are most likely to come from the wages that immigrants earn through their hard work, for which the great majority have already paid taxes. Beyond the issue of double taxation, a tax on remittances may not generate enough revenue to make it worthwhile to administer the program and enforce it. Many would simply avoid this taxation by sending the money through informal means or traveling themselves. Furthermore, taxing remittances would not be enough to change people’s decisions about immigrating or returning. Immigrants already pay between 6 and 3% of what they send in fees to (mostly U.S.-based) businesses such as Western Union that help facilitate these transfers.
Remittances are direct evidence of the many contributions that immigrants make to the U.S. economy. Remittances come from wages, and wages come from producing ideas, art, goods, and services. Thus, I calculate that in 2023, those who sent remittances contributed over 2.7 trillion, which is 10% of the U.S. GDP. Therefore, remittances represent only 3.5% of all the wealth immigrant workers create in the U.S.
Economic contributions of immigrant workers who remitted in 2023. Source Castañeda 2025.
Most importantly, remittances come at the cost of long-term family separation. Many working-age adults come to the U.S. without documents to work and send money to their spouses and children back in their hometowns, who cannot come to the U.S. due to restrictive immigration laws and heavily patrolled borders. This produces decades-long family separation: parents working in the United States and their children living in developing countries. The mental health implications for minors left behind include feelings of abandonment, separation anxiety, and continued grief for an ambiguous loss.
Children grow with more financial resources but without cohabiting with their parents. Many stay behind under the care of grandparents. Still, once their caregivers pass, we may witness unaccompanied minors heading north, as we have seen since 2014, coming from El Salvador, Guatemala, and Honduras. As we document in our book “Reunited,” the reasons why youth migrated were violence, extortion, and recruitment by gangs, higher educational and economic goals, but primarily the desire and possibility of family reunification with their biological parents.
Beyond the separation experienced by “transnational families,” families divided by borders, we increasingly see cases of family units traveling together that are sometimes separated at the border, as well as settled mixed-status families who suffer from family separations due to deportations. The arrest and debasement of parents by authorities in front of children can create a sense of insecurity. Children feel parental separation as abandonment, resulting in reduced self-esteem and self-efficacy. When legal avenues for asylum and low-skilled workers are reduced, international migration becomes more expensive, dangerous, stigmatized, criminalized, and possibly traumatic. This reduces worker productivity and the emotional resources immigrants can deploy to raise the next generations of Americans.
Immigration is an investment in the form of human capital and economic resources. In 2023, the USA received over $7.2 billion in remittances, largely from immigrant family members. Immigrant-initiated family separations produce remittance flows, but they also produce negative health outcomes for the children of immigrants abroad. State-initiated family separations due to deportations weaken the economy by removing breadwinners and leaving U.S.-family members more vulnerable to economic and psychological stressors. Deportations impact international and U.S. families; they also impact foreign economies in the short term but weaken the U.S. economy in the short and longer terms by reducing the size of the workforce and the overall population. A sign of this is that for every working-age person deported to Mexico (who earns the minimum wage in both countries), Mexico loses around US$4,200 in remittances but could gain around $22,613 yearly in wealth by adding another much-needed worker. If the U.S. deports 5 million Mexican citizens and some of their adult U.S.-citizen or third-country family members, Mexico could gain US$113 billion, almost double the US$63 billion remitted to Mexico in 2023. This would also cause family reunifications and population growth in Mexico.
What can Congress do? Taxing remittances is counterproductive. Many immigrants could have faced significant trauma in their countries of origin, and on their way, and immigration law enforcement creates new stressors that exacerbate depression, anxiety, and PTSD. Amnesty programs and creating new pathways to citizenship to ease family reunification and immigrant integration would result in higher taxes, better security, and physical and mental health for all US residents.
Thanks to Tanya Golash-Boza and the staff of the University of California DC Center and the Scholar Strategy Network for co-organizing the policy briefing with CLALS.
Published May 23, 2025.
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