Tax Refunds and Rising Energy Costs: Effects on U.S. Consumers

Overview of the Current Tax Season#

As tax season comes to a close, consumers are experiencing a mixed bag of financial news. While tax refunds are significantly higher than last year, rising energy costs are dampening the positive effects of these refunds. Goldman Sachs predicts that real consumer spending growth will be weak in the upcoming months.

Tax Refunds and Payments#

This year, tax refunds are up by 17% compared to last year, providing some relief to consumers. However, tax payments are expected to increase by $40-55 billion. This increase is still below the anticipated $80 billion rise that would have occurred without the fiscal package known as the One Big Beautiful Bill Act (OBBBA). Despite the higher refunds, the overall tax bills remain relatively stable.

The Impact of Energy Costs#

Since the onset of the war, gasoline prices have surged by 40%, creating a significant financial burden for U.S. households. This increase translates to an estimated $140 billion annual hit to household incomes. Although Goldman Sachs expects this burden to decrease to $60 billion by the end of the year, the total impact for 2026 is projected to be around $70 billion. Lower-income households are particularly affected, spending a much larger portion of their income on gasoline compared to wealthier households.

Consumer Spending Outlook#

The combination of increased gasoline prices and stable tax benefits means that the overall boost to consumer spending is limited. Goldman Sachs forecasts that real disposable income will grow by 1.6% on a year-over-year basis, while real consumption growth is expected to be around 1.2%. Essentially, the financial relief from tax breaks is being offset by rising energy costs, leaving consumers with little net benefit.