The recommendation below is as an element for a ‘tax swap’ related to reducing local property taxes related to school M&O, NOT as more overall money for government.
Conservatives rarely come up with new taxes due to their belief in less government. But to generate relief in areas of overtaxation- such as the current Texas property tax situation- it sometimes is important to not only reduce taxation, but shift some of the burden onto untaxed sources. And there is no greater amount of untaxed revenue than the all-cash underground economy that, in large part, supports illegal immigrants. This untaxed income does however, surface to visibility in significant amounts in one place: wire money transfers.
Cash transfers from the U.S. represent the 2nd largest source of hard currency for Mexico- and the largest source of hard currency in several Central American countries. More importantly, a large share of this is from labor from illegal immigrants, many who are receiving cash-only payments for their labors to avoid federal income tax collection- and to avoid income declarations that would render their families here ineligible for government benefits. Some of that money gets sent home via wire transfers, primarily through services like MoneyGram and Western Union; 40% of all MoneyGram transfers go to Mexico, for example.
So, my recommendation is to look to apply taxation to these transfers, since much of it is vastly undertaxed in relation to other parts of the economy. The least that could be done would to remove the sales tax exemption from the wire transfer service fee, which runs anywhere from $4-$27 depending on the service and amount sent; it probably averages around $9-$10. Ideally, it would be limited to transfers to foreign destinations if possible; but it not, applying it to all transfers is acceptable. We’re talking an average of less than a dollar per transfer: hardly a large burden (nor a large source of revenue) but it would send an important initial message that could be followed up on.
Of far MORE significance, I also would suggest investigating application of a percentage fee on the amount sent by wire transfer, if possible. Even a 1-2% charge for every dollar sent would be a truly significant revenue source, if it can be accomplished legally and politically.
I make these recommendations at significant personal cost. I do direct aid to orphans and poor families in Uganda; a network of support outside the usual charitable organizations, mainly to benefit some who have either ‘aged’ out of the orphanages or their families. I do this by sending wire transfer to trusted people I’ve met over there and know well. I send over 50 transfers a year, totally $8,000-$9,000/year; since I don’t work through 501c3 anymore to do this, I do not get a charitable deduction on my tax return. My proposals would cost me out of my own pocket, but I support them and would testify effectively for them when needed.
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