Bigger Tax Refunds Likely to Power the Economy

The podcast discusses the upcoming 2026 tax refund season, highlighting that the "One Big Beautiful Bill Act" will lead to larger refunds due to various retroactive tax cuts for consumers, including deductions for tips, overtime, a higher child tax credit, and an increased senior deduction. These changes are expected to boost personal income by 15-20% on average in the first quarter, with most consumers likely to use refunds for saving or debt repayment, though some spending on everyday needs, travel, or home improvements is also anticipated. While near-term spending faces headwinds from inflation and expiring Affordable Care Act credits, steady growth in real consumer spending is expected throughout the year due to a stabilizing labor market, decelerating inflation, and easier monetary policy, with the larger refunds further supporting household spending and overall GDP growth in 2026 before becoming a drag in later years as spending cuts take effect.