Is a tax refund spending surge really coming on April 15th next year? Will Americans pay down debt, or buy new stuff?

Photo above - If you're getting a big tax refund after April 15th, you're doing it wrong (the W-4 withholding worksheet). But that's the way the IRS wants it - free use of our money the previous 12 months.

According to Wall Street's JPMorgan (link below) the average federal income tax refund will go up $600 next year. Because Trump’s BBB (big beautiful bill) makes the new tax rates retroactive to January 1st, 2025, but the IRS never did anything to adjust worker and employer withholding.

The average tax refund is $3,000 even before the rate cuts anyway, so an extra $600 may not be the mind-blowing windfall JPMorgan imagines. Why are refunds so high? Some experts believe this is a deliberate strategy by workers who enjoy getting a big check each spring. Other experts believe those huge refunds are evidence that most people are flummoxed by America's complicated tax rules, and cannot select the proper withholding rate (see sample withholding worksheet above). I’m leaning toward the latter – there are 2,000 pages of IRS tax regulations for individual filers alone. I dare you to try and update your withholding worksheet. I dare you.

JPMorgan may also have done the math wrong on the second part of their prediction. They claim the average tariff rate will increase from 8% (today) to 14% in 2026. Which doesn’t relate to anything the White House is tweeting 24/7. But that’s not the problem. If tariffs are increasing 6%, how does JPMorgan figure that the average household will pay $2,400 MORE in tariffs next year? For that to be true, people would have to be spending more than $40,000 annually on imported stuff. Which might be true if you’re buying BMWs and 75 inch flat screen TVs every year, but that’s not how I personally live.

If you’re an investor, how should you "play" the extra $600 refund (other than investing your own pittance)? What stocks could surge because consumers go on a possible spending spree?

Auto stocks come to ,mind. That money - the whole $3,600 refund – could be the cash down payment on a new car lease. More likely however, the extra $600 is going to disappear in the blink of an eye on stuff like Doordash and DraftKings mobile betting. Because we are a nation of spenders, not savers. If you need any proof, just look at our $38 trillion national debt, which will surely get larger as tax rates are cut. Deficits are driven by spending and never cured by higher taxes.

I’m just sayin’ . . .



A tax-refund surge is coming, JPMorgan strategist says — and it’ll shift US economy like a new round of stimulus checks