A small 1% tax in Trump’s “big, beautiful bill” could deliver a big shock to the underground cash economy driving illegal immigration. The remittance tax, targeting cash sent abroad, aims to undercut one of the main incentives migrants have for illegally entering and staying in the U.S.: sending money back home.

Remittances account for tens of billions of dollars flowing from the U.S. each year to countries like El Salvador, Guatemala, and Honduras, where they often form over 20% of GDP. The Trump administration sees the tax as a low-friction tool to discourage illegal immigration while generating $10 billion in new federal revenue, according to estimates reported by Politico.

Earlier versions of the bill floated higher tax rates and targeted illegal immigrants specifically, but the current Senate version imposes a 1% fee only on cash transfers abroad—not electronic transactions. This means even U.S. citizens sending cash abroad will pay the tax, but the policy is aimed primarily at squeezing undocumented workers who send unreported cash home.

“Illegal aliens generally want five things when coming to the U.S.: to enter, to remain here, work, send money home, and bring family,” said Lora Ries of the Heritage Foundation. “Prevent those five things, and you prevent illegal immigration.”

The administration has been layering this tax alongside Project Homecoming flights, stipends for voluntary self-deportation, and birthright citizenship restrictions to encourage migrants to leave rather than risk detention or financial strain.

However, some experts warn the move could boomerang. Ariel Ruiz Soto of the Migration Policy Institute argues that if the remittance tax reduces funds flowing into already struggling economies, it could spur more migration. “If remittances decrease significantly, it could backfire on Trump’s agenda by making economic conditions worse in those countries, driving more irregular migration.”

While the administration argues the tax is a critical piece of its immigration crackdown, critics say a 1% rate will not be effective. “A 1% tax only on cash transfers does very little. The tax should be much higher and cover all transfers,” Ries added, emphasizing that cutting off remittance flows is vital to discouraging illegal employment and incentivizing departures.

Meanwhile, advocates worry about collateral damage to families abroad who rely on remittances for food, school fees, and medical care. They also note it may impact legitimate immigrants and U.S. citizens who prefer to send cash rather than use digital services.

The House is currently weighing the Senate’s version of the “big, beautiful bill,” with the remittance tax likely to remain intact. As the administration accelerates self-deportation programs and toughens enforcement at the border, this tiny tax could soon prove to be one of the most consequential pieces of Trump’s immigration policy—testing whether hitting wallets can succeed where raids and fences often fall short.