By Nana Karikari, Senior Global Affairs Correspondent
A new 1% tax on remittances, part of U.S. President Donald Trump’s “big, beautiful bill,” is causing widespread concern among African diaspora communities, including many Ghanaians. The tax applies to anyone in the United States sending money abroad and is set to begin in the new year. It is feared to create new financial burdens for families back home who rely on these funds for essentials like food, healthcare, and education. The bill also includes other measures related to immigration enforcement and tax policy. The proposed tax rate has also varied in different versions of the bill, with some proposals suggesting a rate as high as 3-5%, further fueling concerns.
For the majority of Ghanaians and Liberians in the US, this tax feels like a direct hit on the financial lifelines they provide. According to the World Bank, remittances from the US totaled $98 billion in 2023. Ghanaians are a significant part of the diaspora that contributed to the $56 billion in remittances sub-Saharan Africa received last year. This amounts to over 612 billion Ghana Cedis, a truly immense sum that highlights the critical importance of these funds to the region’s economy. Liberia alone received an estimated $800 million in remittances that year.
Nana Kobi Kyei, a Ghanaian-American, said she regularly remits cash more than 30 times a year to family and friends.
“It’s not just an inconvenience, it’s a real worry,” said Kwame Osei-Kesse, a Ghanaian living in New York. “Every dollar we send home counts. That 1% might not seem like much, but when you send money frequently, it adds up, and it’s a direct tax on our support for our loved ones.”
The Impact on Families and Development
The new tax comes as many nations are already facing economic challenges. The Center for Global Development, a nonpartisan think tank, described the tax as a financial setback for many countries, especially with recent reductions in American aid. Remittances are often family-to-family transfers. This means the tax has the potential to impact education and health care, as these funds often cover school fees and medical care.
Hilda Suka-Mafudze, the African Union’s outgoing ambassador to the U.S., said hindering such funding “threatens to reverse gains in financial inclusion and development across the continent.”
This is not just an economic issue; it is a human one. “We’re not receiving money for luxuries,” said Ama Boateng, a mother of two in Kumasi, Ghana, who receives support from her sister in the U.S. “It’s for food, it’s for medicine, it’s for my children’s school books. This tax makes everything a little bit harder.”
The Case for the Tax: A Republican View
According to the House Ways and Means Committee, the remittance tax is a measure to “prevent taxpayer benefits from going to illegal immigrants” and to “strengthen the integrity of the financial system.” A press release from the committee stated, “The Committee believes that the ability of non-citizens and non-nationals of the United States to send payments to individuals in other countries through the system of remittance transfers may encourage illegal immigration.” They also argued that the revenue generated would help fund the bill’s broader tax cuts for working-class American families, which they claim will “rebuild the economy for the working class.”
A Diplomatic and Political Obstacle
Witney Schneidman, a nonresident senior fellow at the Brookings Institution’s Africa Growth Initiative, argues the tax is “just a further constraint on the U.S. effort to work with our partners on the continent.” He warns it is another obstacle to partnership and development.
Schneidman, who previously served in the former U.S. president Bill Clinton administration, condemned the Trump administration for “building barriers and not bridges.” He sees the tax as part of a larger trend, stating that when you add it up with “visa blockages, with the end of the African Growth and Opportunity Act (AGOA), with the end of USAID, it’s just building a wall.”
The potential for this tax to push people toward informal or unregulated channels is a major concern. Suka-Mafudze fears this could make transactions riskier and less transparent. Concerns have also been raised by a broader coalition of civil society organizations, including the African Diaspora Network (ADN) and the Pennsylvania Legislative Latino Caucus, who argue the tax is a privacy violation and could make financial transactions more dangerous.
The Fight for Change
In response to the tax, Democratic Representatives. Sheila Cherfilus-McCormick of Florida and Jonathan L. Jackson of Illinois have introduced new legislation called the African Diaspora Investment and Development Act, or AIDA. The bill is officially titled H.R.4586 and has been referred to the House Ways and Means, Foreign Affairs, and Financial Services committees. The bill is aimed at reversing the tax’s impact and creating more transparency in money transfers.
Rep. Cherfilus-McCormick, the only Haitian American member of Congress, stated, “I strongly oppose any effort to tax remittances and will continue fighting for policies that protect immigrant and diaspora communities.” She said the legislation “intends to reverse course and instead focus on incentivizing and leveraging on the nearly 100 billion dollars that Haitian, African and Caribbean Americans send home each year to build sustainable partnerships and strengthen economic development.”
The debate over this new tax underscores the vital role the African diaspora plays in sustaining their home countries. While the 1% levy may appear minor, its true cost is measured in the added hardship it places on families already grappling with economic precarity. This isn’t just a financial burden; it’s a tax on the deep-rooted love and commitment that defines the diaspora’s relationship with their communities. Despite this obstacle, the unwavering support of Ghanaians, Liberians, and others across the continent remains a powerful force—a bond that no tax can break.
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