Contrary to assumptions of an immediate spending spree, consumers are expected to use larger tax refunds primarily for saving and debt repayment. This behavior strengthens household financial health first, indicated by higher loan prepayments and fewer delinquencies, delaying a significant rise in discretionary consumption.
While larger tax refunds offer a financial lift, low-income households face simultaneous headwinds. The benefit of increased income is at risk of being neutralized by rising costs from tariff-driven inflation and the expiration of Affordable Care Act credits, creating a precarious financial situation for this group.
The "One Big Beautiful Bill Act" front-loads tax cuts, boosting consumer income and GDP in 2026. However, its spending cuts are delayed until later in the decade, meaning the bill will become a drag on economic growth in subsequent years as those austerity measures take effect.