WASHINGTON, Feb 9, 2026, 03:20 (EST)
- President Donald Trump’s new tax law is set to deliver bigger refunds, with the gains skewed toward those earning more.
- The IRS heads into filing season down a significant chunk of its staff, and facing a stack of fresh regulations to roll out.
- Economists aren’t convinced the refund bump will show up as a straightforward increase in consumer spending.
Americans are on track for bigger tax refunds this spring thanks to President Donald Trump’s new tax law. But with the Internal Revenue Service operating under tighter staffing, payouts could drag—potentially dimming the White House’s hopes for a swift boost to household spending.
With congressional elections coming up in November and frustrations over living costs lingering, the administration has made a show of touting refunds as a direct win for consumers’ wallets. Trump, according to aides, is promising economic growth “numbers that have never been hit before.” Treasury Secretary Scott Bessent, for his part, is talking up a “blockbuster” 2026, the Washington Post reported. https://www.washingtonpost.com/business/20…
It’s a big deal—refunds come in fast, mostly over a tight period, and they’re landing on an uneven consumer landscape. Some households are still opening their wallets, while others are just treading water.
Last summer’s One Big Beautiful Bill Act locked in some earlier tax breaks for good and rolled out fresh deductions that will hit 2025 filings, kicking in for returns due this year. The law also bumped the SALT (state and local tax) deduction cap up to $40,000 for 2025 filers, but higher earners get less benefit—the cap phases out and then drops right back to $10,000 past a certain income line, according to the New York Times.
Bank of America Global Research is projecting a sharp jump in refunds for 2026, expecting payouts to land roughly $65 billion above 2025 levels — that’s an 18% bump, according to Fortune. The uptick comes as a result of the new law and its ripple effects. Aditya Bhave, senior U.S. economist, highlighted a growing “K-shaped” split in spending, cautioning that wealthier households could widen the gap while those with lower incomes are left behind. “The consumer divide is about to get deeper,” Bhave said. https://fortune.com/2026/02/05/trump-tax-r…
The distinction has real weight for the broader economy. When higher earners get extra cash, they’re prone to stash it away or invest, not rush out to spend. But for households with less income, a windfall typically heads right into immediate necessities.
The IRS is stepping into the season with less room to maneuver. Erin Collins, the National Taxpayer Advocate, flagged a 27% drop in staff, leadership shakeups, and a wave of “extensive and complex” tax changes—plenty of them retroactive. Collins cautioned that the real test will be how the agency supports “the millions of taxpayers who experience problems.” https://www.irs.gov/newsroom/national-taxp…
Garrett Watson, director of policy analysis at the Tax Foundation, told Business Insider that a leaner IRS and complicated new rules mean “a higher risk of errors” and declining service quality. Former IRS commissioner Danny Werfel pointed to “vulnerabilities” that crop up when big regulatory changes hit during staff cutbacks, singling out phone support as a key area under strain. https://www.businessinsider.com/tax-season…
The IRS kicked off the 2026 filing window on January 26, giving taxpayers until April 15 to submit returns, according to the agency’s filing-season guidance. Bessent noted that Treasury and the IRS had been working on form and process updates to reflect the new law. IRS Chief Executive Officer Frank Bisignano added that system upgrades are in place, with the agency “ready to help taxpayers” this season. https://www.irs.gov/newsroom/irs-announces…
The White House is taking a gamble here. Delayed refunds, or households channeling the cash into debt, rent, or insurance instead of shopping, might end up muting the lift in consumer demand that officials are counting on. And if there is a spike in demand, that could just add another wrinkle for the Federal Reserve as it deals with inflation.
Some economists expecting stronger growth this year still call the policy’s impact limited. Claudia Sahm, chief economist at New Century Advisors, put it to the Washington Post like this: the economy could edge toward 3% growth, “but this is not five or seven”—a pointed note that fatter refunds don’t guarantee a sweeping boom.
