As part as of current budget reconciliation package, the U.S. Senate is currently considering a proposal to impose a 3.5% tax on personal money transfers sent abroad.  The House of Representatives already approved the measure.

While the measure is meant to punish immigrants financially, it will actually have broad and damaging consequences for many Americans, including legal residents, military service members, and missionaries, and those who support loved ones outside of the country.  Foreign investment in the United States—undeniably a good thing for our economy—will be reduced as well.

One of the most troubling aspects of this tax is its effect on legal residents who have followed every rule, paid their taxes, and contributed to their communities. By taxing funds sent to family members abroad, the federal government would be penalizing those who are playing by the rules. These individuals are already paying income and payroll taxes—this additional remittance tax amounts to double taxation on hard-earned income.

Military families who support loved ones in other countries and missionaries providing faith-based international aid are other examples of people who would be hurt by this tax.

Additionally, there are serious privacy and administrative concerns.  The remittance tax would require individuals to submit additional sensitive personal information to the IRS, adding new layers of complexity to an already burdensome tax system.  Financial institutions are not equipped to implement the cumbersome procedures imposed by this tax.  This raises troubling questions about data security and could create what amounts to a national registry of Americans who send money overseas.

It is highly likely that the remittance tax will push transactions into unregulated channels, undermining its very purpose and making it harder to track transnational criminal activity.

Rather than target legal residents, American citizens, and those who contribute to our economy and support their families, Congress should focus on solutions that protect national interests without punishing everyday Americans.