This Tax-Refund Bonanza Won’t Do What Bessent Says It Will

By Jupiter Lion February 3, 2026

Treasury Secretary Scott Bessent has spent months heralding a massive “tax-refund bonanza” scheduled for the spring of 2026. Predictors from the Treasury Department suggest a “gigantic” windfall that will ignite a “non-inflationary boom,” with household refunds expected to jump by $1,000 to $2,000 on average. Bessent’s narrative is clear: a surge of cash hitting bank accounts between February and April will serve as a powerful economic catalyst.

However, a closer look at the data suggests this optimism is misplaced. While the estimated $90 billion to $100 billion increase in refunds—driven by retroactively applied provisions from the One Big Beautiful Bill Act (OBBBA) signed in 2025—sounds substantial, it amounts to only about 0.3% of the U.S. annual Gross Domestic Product (GDP). For a windfall to spark a “boom,” it generally needs to be large enough to move the needle on national consumption. At this scale, it is more of a ripple than a wave.

The Distribution Problem

The primary reason this “bonanza” is unlikely to fuel a broad economic surge lies in who is actually receiving the money. Economically speaking, a tax cut provides the most stimulus when it reaches lower-income individuals who have a high “marginal propensity to consume”—meaning they are likely to spend every extra dollar they receive on immediate needs.

Yet, IRS statistics show that the vast majority of federal income tax revenue is generated by the affluent. In the 2022 tax year, the top 7.7% of returns (those reporting $200,000 or more) accounted for 68.5% of all income tax revenue. Conversely, the bottom 66.8% of returns (those earning up to $75,000) accounted for just 7.7% of the revenue.

Because the new tax breaks—including higher SALT (State and Local Tax) deduction caps and new deductions for overtime and tips—primarily target those who already pay significant income tax, the benefits are heavily skewed toward the upper middle class. An analysis by the American Enterprise Institute (AEI) found that:

• 62% of the tax-break money goes to households between the 60th and 95th income percentiles ($65,000 to $262,000).
• 14% goes to the top 5% of earners.
• Just 6% reaches the bottom 40% of the income distribution.

Savings vs. Spending

Even when the money reaches the middle class, there is no guarantee it will be spent. Historically, middle- and upper-income households are more likely to use unexpected windfalls to pay down debt or increase their savings rather than fuel new consumption.

A 2021 survey by NORC at the University of Chicago indicated that among those earning between $60,000 and $100,000, a large majority planned to save their refunds. Only those making less than $30,000 expressed a majority intent to spend the cash immediately. Furthermore, studies published in the American Economic Review suggest that for every dollar of tax refund received, only about 15 to 21 cents is actually spent in the subsequent months. The rest—nearly 80%—is effectively sequestered into bank accounts or debt payments.

The Tax Policy Paradox

The 2025 budget law introduced several specific individual breaks that contribute to this year’s larger refunds:

1. Overtime Deduction: Up to $12,500 for individuals ($25,000 for couples).
2. SALT Cap Increase: Raised from $10,000 to $40,000.
3. Standard Deduction Bump: Increased to $15,750 for singles and $31,500 for joint filers.
4. Auto Loan Interest Deduction: Up to $10,000 for U.S.-made cars.
5. Senior & Tip Deductions: New breaks for those 65+ and service industry workers.

While these measures are popular, they add layers of complexity to the tax code and create inequities by taxing people in similar financial situations differently. More importantly, they do little for the very poor. The 2025 federal poverty level for a family of four is roughly $32,150; for these families, an income tax deduction is often worthless because they already have little to no federal income tax liability.

Conclusion

Secretary Bessent’s “non-inflationary boom” assumes that the American consumer will treat these refunds as a license to spend. But the math doesn’t add up. The money is too concentrated at the top, the total volume is too small relative to the overall economy, and the behavioral tendency to save rather than spend remains dominant.

While it is certainly pleasant to receive a four-figure check from the IRS, this refund cycle is more likely to be a quiet strengthening of middle-class balance sheets than a loud explosion of economic growth.