Tennessee Proposes New Tax on Money Transfers Abroad
Tennessee is moving forward after a legislative attempt to impose a tax on U.S. dollars transferred overseas by immigrants did not pass.
House Bill 2502/Senate Bill 2166, put forth by Republican House Speaker Cameron Sexton and Republican Senator Beau Watson, aims to levy a $10 fee on each transaction or 2% on amounts exceeding $500 for sending money out of the country, as reported by Tennessee Outlook.
The proposed legislation would not apply to bank and corporate transfers, focusing instead on personal transactions conducted through retail outlets, currency exchanges, and services like Western Union.
An analysis suggests that this tax could yield an additional $183 million in annual revenue for the state. The funds would be allocated to various state sectors: 20% to the general fund, 38% to the TennCare “buyback fund” for hospital reimbursements, and the remainder split between child care, housing, and internships for teachers in public schools.
Officials indicated that Tennesseans made over 16 million such transfers, totaling $5 million sent to locations outside the U.S.
The act of sending U.S. dollars to one’s home country is often referred to as “remittance.” This refers to the significant flow of money—tens of billions of dollars—from the United States annually. For instance, in 2011, it was estimated that $52 billion was sent abroad by both legal and illegal immigrants—a figure that has likely increased since then.
This desire to send money home is a crucial yet frequently overlooked aspect of the ongoing border situation. Remittances represent a challenge for the U.S., as they withdraw funds from the domestic economy and direct them abroad. A 2019 estimation indicated a loss of approximately $150 billion a year due to money being sent back home. This trend has seemingly accelerated following the current administration’s policies.
When money leaves the U.S., it’s not circulating within the economy—it’s not being spent in shops, invested, or deposited in bank accounts. This is increasingly seen as a financial deficit for the country.
During Donald Trump’s presidency, efforts were made to tighten the rules surrounding money transfers that had become more lenient during George W. Bush’s administration. In 2006, Bush introduced the “Mexico Direct Remittance” program, simplifying the process for expatriates sending money back to Mexico and other countries. Trump later implemented some restrictions on these transactions, but many of these were reversed under President Biden, reopening the channels for immigrants to send U.S. dollars overseas.
