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Media coverage of the budget bill President Donald Trump signed into law on July 4 has been so negative that many Americans may not fully appreciate the changes to tax law. They’re in for a pleasant surprise come spring. While many news consumers may be aware that the new law prevents massive tax hikes by renewing the rate reductions included in Mr. Trump’s 2017 reform, they may be fuzzy on the amount of actual tax cuts coming their way. Don Schneider at Piper Sandler writes in a note to clients today: The recent budget reconciliation bill, formally known as the One Big Beautiful Bill Act (OBBBA), could deliver around $191 billion in net new individual income tax relief in calendar year 2026 (0.6% of GDP). Almost half of that relief is retroactive but it seems unlikely many people will adjust their withholding to claim benefits this year. Instead, they will be surprised by large refunds during the filing season next year. During the January to April filing season, we estimate tax filers will receive about $91 billion in additional refunds from the 2025 retroactive tax cuts plus another $30 or so billion from reduced withholding on 2026 taxes. The retroactive tax cuts could average about $1,000 per return though it will be substantially
more for some filers… If we assume all of the $91 billion in retroactive tax relief is paid in the form of refunds (as opposed to reducing an individual’s otherwise positive residual tax liability at the time of filing) it would be the largest refund season of the last decade in nominal terms. Total individual income tax refunds this year could be as high as $370 billion (though as a share of GDP it would be 1.2%, about the same size as the 2021 refund season). As autumn follows summer, one can expect Democrats in Congress to claim that the new law favors the rich. For this column’s wealthiest readers, the sad news is that it’s just not so. Mr. Schneider
writes:
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