If you haven’t heard already, in light of Mexican president Pina Nieto’s big middle finger to Trump’s grandiose plan to make his country pay for a “big, beautiful wall” on the border with the United States, 45 has made another proposal: let’s levy a 20 percent tax on imports from Mexico!
Some of the Republicans I know, who normally oppose more taxation, were doing a happy dance. “YEAH! Mexico will pay for the wall one way or another!”
Ummmmm… no. YOU morons will. You will buy more expensive Mexican products, and by the way, since Mexico is one of our top five sources of oil, you’ll likely be paying more to fill up your big, ole truck too! It’s a tax on U.S. consumers, not on Mexico, and I won’t even mention what that’s doing to U.S.-Mexico relations, even as Mexico becomes one of our most important partners in fighting cartels, stopping illicit funds from crossing the border, and working to freeze and block the assets of illicit financiers.
Some, who realize that a 20 percent tariff on Mexican goods =\= Mexico paying for a wall, have developed other “bright” ideas.
“Oh, I know! Let’s tax all remittances going to Mexico! That’ll be GREAT! Most of them are illegals sending money home anyway! YEAH!”
I’ve detailed previously why this is a bad idea when Trump tried to threaten Mexico with seizing remittances.
Immigrants both legal and illegal send money back home to Mexico. How the hell does one separate the “good” money from the “bad?”
Seizure of private property without due process in order to threaten Mexico with reducing the country’s GDP by an estimated less than two percent? Good plan, there, Sparky!
Stop all financial transactions from banks here to Mexico? You’ve just pissed off the financial sector and empowered bulk cash smugglers, who make billions of dollars per year carting monetary instruments across the Mexican border.
But beyond that, even if you don’t stop the remittances, you would have to examine each one to see if it would be subject to this tariff. This idiot plan would drive up compliance costs for money service businesses (MSB), such as Western Union and MoneyGram, and grow the surveillance state.
Right now, under the Bank Secrecy Act, financial institutions, including MSBs, must file a currency transaction report (CTR) with the Financial Crimes Enforcement Network (FinCEN) for each transaction in currency of more than $10,000. If you think the average remittance to Mexico exceeds this amount, you’re an idiot. The average remittance amount to Mexico in 2003 was $321, according to World Bank data. Even if it’s doubled or trebled in the last 15 years, it will still be far below the threshold.
So, we’d have to decrease the CTR amount. No big deal, right?
Except that MSBs and other financial institutions would have to hire extra compliance staffs to fill out the CTRs and subsequent suspicious activity reports (SAR) when a customer inevitably decides that it’s not worth having his $400 examined and probed by numerous people and declines to complete the transaction. Extra compliance personnel cost money – not just in salaries, but benefits as well. There skyrocket your costs of sending a couple of hundred bucks to your mom in Mexico! And there plunges your volume. Because, really… who the hell would want to pay an extra $10-$20 just to have mom pick up the cash in Coahila?
And then there are the compliance costs on the government side. Guess who gets to pay for those! How many new feds do you think would have to be hired to comb through the volumes of CTRs and SARs generated by the new thresholds? Considering just how many Mexicans we have sending money back home, lowering the transaction threshold would mean that thousands more feds will be combing through thousands more reports that are generated. The feds already have a lot of access to transactional data. You really want to give them more?
Additionally, as Larry Correia mentioned yesterday, “you start regulating something, the shadow economy will grow.”
I mentioned bulk cash smugglers above. Cartels already have hawala-like networks of trusted associates to conduct mirror transactions. That’s a market, I’m sure they couldn’t wait to tap, especially if there’s a mass exodus from regular MSBs! You start increasing regulations on hawalas, and aside from causing dilatory second and third order effects in countries without developed financial sectors that rely on hawala networks to move money, you’re also going to once again increase the compliance personnel required for said increased regulatory environment.
Wanna pay for more feds to snoop into everyone’s finances? Most Republicans, before 45 took office, would have screamed a vigorous “NO!” Now… not so much.
And by the way, if you think there aren’t ways to avoid the formal financial system, I encourage you to purchase a gift card. For a fee of $5.00 and a couple of stamps, you too can send a $400 Visa gift card to your mom in Mexico, which she can use to buy groceries or anything else she needs! You want to regulate that? You’ll need extra post office personnel to go through all the mail, identify the letters going to Mexico, and track the remittances that way.
Or, just start charging an extra fee for every gift card purchased, which will go directly to the feds to build that wall. In which case, once again, YOU are the ones paying for it!
That’s how you build a police state, Republicans. Enjoy!