The green, white and red flags waving during the Los Angeles protests have shown how deeply Mexicans have embedded themselves in the U.S. — and President Claudia Sheinbaum’s reaction to the protests underscored how much her government has become dependent upon the money those Mexicans are sending home.

Ms. Sheinbaum has been on a mission to try to head off a provision in President Trump’s One Big Beautiful Bill Act that would impose a 3.5% tax on money that’s shipped abroad.

Known as remittances, they have become the foundation of economies throughout Latin America.

In Mexico, remittances account for about 4% of gross domestic product, serving as the single largest source of foreign income.

In Central America, remittances are even more important. Nicaragua saw remittances go from 11% of GDP in 2018 to 23% last year. They account for 24% of GDP in El Salvador and 26% in Honduras. Money from the U.S. accounts for nearly all of that.

The idea of taxing remittances has long been popular among those who favor a crackdown on illegal immigration.

“It’s been a long time in the making, but it’s a no-brainer,” said Rosemary Jenks, policy director at the Immigration Accountability Project. “If you have American money leaving your economy, you should maybe take a look at that and see if you can do something about it. And obviously there is something we can do about it.”

Ms. Sheinbaum vowed to make a stand.

She urged Mexicans and Mexican Americans in the U.S. to lobby Congress to register their opposition.

She called the tax unconstitutional, saying it amounted to double taxation.

“This is an injustice,” she told reporters last month, according to Mexico News Daily.

Her resistance sparked a reaction from Sen. Eric Schmitt, Missouri Republican, who on Tuesday filed legislation calling for the tax to be set at 15%.

“America is not the world’s piggy bank,” he said. “It’s time to put America first. By implementing a 15% tax on remittances, we will keep more money in the United States and put American workers in the driver’s seat once again.”

Latin American nations that for years have cheered as their residents headed north are now petrified that such a plan could become law.

Nicaragua, for example, has seen its citizens in the U.S. grow from about 280,000 in 2017 to more than 800,000 by last year, thanks in large part to a special Biden program that welcomed them.

That helps explain how that nation’s remittances more than doubled to reach 23% of GDP.

“It’s the linchpin of the Nicaraguan economy,” said Emilio Gonzalez, who ran U.S. Citizenship and Immigration Services in the Bush administration. “Remittances are what’s keeping Daniel Ortega in power.”

He said it’s tough for countries to give up that income, even though it comes with some social costs.

“It’s free money. You don’t have to work for it. You don’t have to budget for it. The government doesn’t have to offer any services for it. That’s the best kind of money, it’s other people’s money and it’s free,” Mr. Gonzalez said.

Democrats have decried the tax.

Rep. Sheila Cherfilus-McCormick of Florida called it “cruel.” Rep. Jesus G. “Chuy” Garcia of Illinois predicted it would backfire, extending poverty in other countries and sending more people toward the U.S.

“When immigrants send money home, they are not just helping loved ones. They are keeping entire communities afloat in countries like Mexico, Nigeria, and the Philippines,” Mr. Garcia said.

A remittance tax would hit globally.

India is the world’s largest recipient of remittances, though with more varied sources. The U.S. now accounts for nearly 28% of its remittances, up from 23% a few years back, and has bumped the United Arab Emirates from the top spot.

In Haiti, which, like Nicaragua, benefited from a special Biden parole program, remittances have jumped from about 12% of GDP a little more than a decade ago to about 20% now. They far outstrip exports and foreign direct investment as a source of cash.

The Haitian Bridge Alliance suggested that the attempt to tax remittances was racist.

“This is not sound policy — it is legalized extortion targeting Black, brown, and immigrant families who have already sacrificed so much to sustain both their adopted countries and their nations of origin,” said Guerline Jozef, the alliance’s executive director.

The way the remittance tax is written in the House budget bill, it would apply to money U.S. citizens send to other countries, too. The legislation includes provisions to claim a credit to offset the tax.

Oklahoma has had a remittance tax for years, with a similar tax credit provision. The belief is that unauthorized immigrants don’t attempt to claim the credit.

Some analysts dispute the idea that remittances are money lost to the U.S.

Ilya Somin, a law professor at George Mason University who vigorously advocates for more lenient immigration policy, said in an essay at the legal blog Volokh Conspiracy that the money usually finds its way back to the U.S. through dollar-denominated purchases.

Mr. Somin also derided the tax as anti-family values.

“Immigrant workers should pay the same taxes as everyone else, and should not be subject to additional taxation when they use some of their hard-earned pay to send remittances to their families,” he wrote.

Originally, the House budget plan called for the tax to be set at 5%. At that rate, the Congressional Budget Office predicted it would raise about $22 billion over the next decade.

• Stephen Dinan can be reached at sdinan@washingtontimes.com.