A government secure in its liberty and confident in its citizens does not tax generosity.
A government secure in its liberty and confident in its citizens does not tax generosity.
W hile many Americans celebrated Independence Day with fireworks and parades, a provision in the newly signed One Big Beautiful Bill Act imposed a 1 percent tax on international remittances, penalizing any American citizen or noncitizen who sends cash transfers, money orders, and cashier checks across U.S. borders.
The premise is simple. The consequences are anything but. For the trucker who’s wiring part of his paycheck to his parents in Mexico, the nurse who’s supporting her siblings in Nigeria, or the Afghan interpreter who’s helping his cousins resettle, the tax is a penalty on one of the purest expressions of human freedom: the use of one’s labor to support loved ones.
Proponents argue that the purpose of the tax is to discourage illegal immigration and to raise revenue, but, so far as the latter is concerned, it is highly unlikely to succeed. According to the Tax Foundation, the tax is administratively complex, hard to enforce, and likely to generate minimal revenue relative to its compliance costs. It also risks driving transfers into informal channels, undermining transparency while punishing legal financial activity.
But the tax on remittances also reflects something more troubling: a part of a long-discredited theory that money flowing abroad weakens the nation. Heritage Foundation scholars argue that “the U.S. government has not touched the annual billions of dollars going out of the country, not benefiting the U.S. economy.” This reflects the belief that money leaving our borders weakens America. That’s not just bad policy. It’s bad history.
To understand why, we return to 1776. The year Americans declared independence, the economist Adam Smith launched a revolution of his own, publishing The Wealth of Nations, an attack on the mercantilism that had been embraced by governments in that era. One aspect of this practice involved piling up gold reserves and restricting money outflows in a top-down effort to drive national prosperity. Smith rejected this idea. Wealth, he argued, is not in cash but in the capacity to produce and trade. He mocked the notion that sending money abroad made a nation poorer, calling these views “vulgar prejudices.” He wrote that even if all of a country’s money was exchanged for useful goods, that was no loss. Wealth flows back through trade, investment, and the trust of global exchange.
To the extent that concern about outflows of money has been part of the rationale for the introduction of the remittance tax, it signals a rebirth of this mercantilist fallacy. It treats money sent abroad not as part of global prosperity but as a taxable loss. It suggests that your right to property doesn’t depend on how you’ve earned it but on how you use it. When your love, duty, or generosity crosses a border, the government gets a claim to it — an extension too far of state power.
Adam Smith was not just an architect of modern economics; he was also a moral philosopher. In both The Theory of Moral Sentiments and The Wealth of Nations, he wrote that human beings act in self-interest but also from sympathy, duty, and affection. When a son sends money to his aging mother in El Salvador, this is not a cold economic transaction. It is gratitude made real. It is virtue in action. To tax such acts is to punish someone for doing the right thing. Smith believed that justice was not merely a duty of the state but the foundation of society itself. Justice, he wrote, “is the main pillar that upholds the whole edifice.” At the very least, justice demands that the government does not harm those who act rightly. Yet the remittance tax does just that. It attacks the global poor, the foreign-born, and the dutiful family member — not because they have done wrong but because they have acted with responsibility across a border. That is not justice.
Some will argue that 1 percent is a small price to pay, a rounding error. But what’s being rounded off is not income, it’s intent. It’s a case of the government’s inserting itself between people and their personal obligations. As Smith understood, economic liberty is not just the freedom to buy and sell. It is also the freedom to fulfill one’s own conception of responsibility. A tax on remittances is an erosion of that freedom and a rejection of the moral fabric that gives market society its legitimacy.
Smith wrote that “little else is requisite to carry a state to the highest degree of opulence but peace, easy taxes, and a tolerable administration of justice.” On all three fronts, this remittance tax fails. It is an obstacle to peaceful exchange, a violation of fiscal liberty, and a blow to justice buried in technocratic language. It stands against good policy not merely because it’s inefficient but also because it violates the principle that free people should be free to support their loved ones. A government secure in its liberty and confident in its citizens does not tax generosity.