Investing.com - House Republicans released a much-anticipated tax proposal earlier this week, as lawmakers race to pass U.S. President Donald Trump’s "big, beautiful" bill of tax cuts and spending reductions before Memorial Day.
The plans were sweeping, covering everything from state and local tax deductions to clean energy tax credits.
Taken together, reports say the major pillars of Trump’s budget legislation -- which would see the extension of tax cuts instituted during the president’s first term -- may add around $36.2 trillion to the country’s debt over the next decade. The tax cuts themselves would cost $3.72 trillion, Reuters reported.
To offset some of the drawdown in taxes, Republicans proposed a slew of tax hikes.
One of these would see remittances by individuals to family members or others in foreign countries face a new 5% tax. Crucially, American citizens would not be subject to the levy, meaning that migrant workers in the U.S. who send money abroad could be impacted.
"If passed as written (a big ’if’) we see more headwinds for providers with undocumented customers," analysts at Barclays said in a note to clients. "Pending the final outcome, the largest headwind may be felt via cash/retail channels."
Additional complexity and expenses would hit this industry, they added, flagging that this would "disproportionately impact" firms like Western Union (NYSE:WU) and Remitly (NASDAQ:RELY) in particular.
"For example, the requirements of the bill appear designed to not only generate income from the excise tax, but also to compel all remittance providers to check and report the citizenship status of their customers," the analysts wrote.
"Further, the process to recover the tax appears far from seamless: The text of the proposed bill alludes to annual consumer filings with the government to recover a sender’s total/aggregate excise taxes collected throughout the prior year."
However, the brokerage noted that there is still a long road for the wider Republican budget bill to traverse prior to becoming law. Along with its passage through the House, the measure must be approved by the Senate before heading to Trump’s desk, where it is signed into law.