Three ways Mexico could pay for the wall
Officials south of the border say they’re not interested in shelling out a single peso for the structure, which could cost more than $20 billion.
The President’s latest budget proposal earmarks $1 billion for the wall, a first installment that Trump has said will get things going before Mexico eventually chips in.
Lately the White House hasn’t been as vocal about Mexico’s role in the project, and Senate Majority Leader Mitch McConnell has flat out denied there’s any chance the neighboring country will contribute.
But is there any way for Mexico to fund a border wall without officials there dipping into their country’s coffers?
Let’s crunch the numbers on a few possible options that have made the rounds in Washington:
1. Tapping into money immigrants send home
Mexican immigrants sent nearly $27 billion home in 2016, according to the country’s central bank. And most of that money came from people living in the United States.
Generally, immigrants report that the money they send funds things like food, clothing, housing and education for their families. What if some of it went to building a wall on the border?
On the campaign trail, Trump said he’d change the Patriot Act and cut off a portion of remittances to Mexico unless the country agreed to pony up. Since then, a less aggressive approach has circulated in some policy circles: taxing wire transfers, the most common way immigrants send money home.
That idea is unpopular with money transfer companies and immigrant rights advocates.
And Mexican authorities have vowed to do everything they can to ensure that no one messes with the money immigrants send. It’s Mexico’s largest source of income — higher even than the amount of money it earns from oil exports. Even though remittances are a small portion of Mexico’s GDP, they have a big impact in some of the country’s poorest communities.
In the Mexican state of Michoacán, for example, migrant remittances made up almost 10% of the state’s gross domestic product in 2015, according to data from the Bank of Mexico and BBVA Bancomer.
Past proposals to tax remittances have never gotten off the ground in Washington. But at least one US state has taken this approach.
In 2009, Oklahoma started charging a fee on individual wire transfers of $5 plus 1% on any amount over $500. Since then, the measure — which applies to funds sent through licensed money transmitters like Western Union and MoneyGram — has raised more than $67.2 million for a fund at the state’s Bureau of Narcotics and Dangerous Drugs Control, according to state tax records.
The case: For those who resent that undocumented immigrants not only live in the United States, but also send money out of the country, a remittance tax is an attractive option, as the National Review’s Jim Geraghty has noted.
“In their eyes,” he wrote in 2015, “illegal immigrants from Mexico effectively steal from the United States by entering the country, offering unethical employers a labor force that isn’t covered by wage, workplace safety, and other laws, getting paid under the table, and then sending the money out of the country.”
The catch: Wire transfer companies don’t ask for or track the immigration status of people who use them. If they did, analysts say undocumented immigrants simply would find other ways to send money. So it’s likely a tax would end up applying to anyone who sends remittances — something critics say would unfairly punish Americans and immigrants who came to the country legally. Oklahoma tried to get around this by creating a tax credit for its fees; but critics argue that many people eligible for credits don’t take them.
Critics also say a tax on remittances would likely push Mexicans to find other ways to get cash over the border.
“In the paranoid atmosphere that’s been created by certain anti-immigrant statements, I think it would make people even more reluctant to use official channels,” says David Landsman, executive director of the New York-based National Money Transmitters Association.
The chances: The numbers might add up, but it’s still a tough sell. Congress is loathe to levy taxes in general, though a tax reform package to be discussed this year could offer an opportunity. Congressional leaders have priorities in that package that they will not want derailed if a plan to tax remittances becomes too controversial. Relations between the US and Mexico would also surely factor into the debate.
2. Seizing money from drug cartels
US Rep. Jim Sensenbrenner, R-Wisconsin, introduced a proposal last month titled the BUILD WALL Act of 2017. Its aim: to use money seized from drug traffickers to fund security at the border.
The case: Sensenbrenner’s proposal calls for the US Attorney General to study ways the Justice Department can increase assets seized from cartels. He dubbed the approach “a creative solution to a complex problem.”
Drug cartels send between $19 billion and $29 billion annually back to Mexico, according to US federal officials. And using money from criminals rather than law-abiding US taxpayers to foot the bill for anything sounds like an easy sell.
The catch: Authorities on the southwest US border have already seized a large amount of money heading to Mexico: more than $57 million in four years, according to US Customs and Border Protection (CBP). But it’s just a fraction of the smuggled money officials believe is crossing the border — and just a fraction of the estimated cost of a wall. And currently, at least some of the money seized from cartels is already spoken for. Currency CBP seizes that is forfeited goes into a Treasury Department fund that’s used for law enforcement initiatives across the country. The amount of money seized has also decreased in recent years. A recent CBP report noted “significant decreases in both the number of seizures and the average dollar value” of the amounts seized.
The chances: Harder than it sounds. Passing legislation in Congress is always difficult, and this year a lot of time is already expected to be eaten up by Obamacare repeal, tax reform and budgeting. Any bill perceived to be an element of Trump’s border security efforts will become controversial, as Democrats seek to oppose his immigration policies and have deemed the wall a poison pill in any legislation. Plus, asset seizure tiptoes into criminal justice reform, its own area of disagreement on the Hill.
3. A border tax
In January, Trump administration officials suggested a 20% tariff on imports from Mexico could be used to pay for a border wall. The idea was floated early on in Trump’s presidency, and in some circles, it sank. After the proposal drew a swift uproar from lawmakers on both sides of the aisle, White House officials who’d touted it later said it was just an idea.
If such a plan is put into place, a vast array of items — including cars, mechanical equipment, produce and household goods — would be subject to a levy.
The case: When it comes to exports and imports, there’s a lot of money in play. Mexico is the United States’ third largest goods trading partner, with an estimated $295 billion in imports from Mexico crossing the border in 2015.
“By doing it that way we can do $10 billion a year and easily pay for the wall, just through that mechanism alone. That’s really going to provide the funding,” White House spokesman Sean Spicer said in January.
Later that day, he sent a softer message, saying the border tax idea was intended to be just one example of paying for the wall. “I just want to be clear that we’re not being prescriptive in saying that is the only way,” he said, “nor is the rate prescriptive.”
The catch: Critics say such a tax would punish consumers more than anyone else, it would violate NAFTA and it could spur a trade war. Republican Sen. Lindsey Graham quickly dismissed the idea, posting a tweet that played off the President’s own Twitter style.
“Simply put,” Graham wrote, “any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad.”
The chances: Low. Lawmakers are already engaged in a heated debate over a proposed border adjustment tax, which would tax imports from around the world while exempting exports from US taxes. While House Speaker Paul Ryan and like-minded Republicans are in favor, the proposal still faces a heavy set of opposition from inside and outside the party. Tacking on a Mexico-specific tax is unlikely to get much traction, as we saw with Spicer’s swift walkback of the trial balloon earlier this year.