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The promise was simple and seductive: pass the One Big Beautiful Bill, flood American wallets with historic tax refunds, and watch the consumer economy roar. For a few weeks this winter, it looked like it might actually work. Then the bombs started falling on Iran.<\/p>\n
Now Wall Street has delivered its verdict. Two of the most closely watched economic research teams on the Street\u2014Goldman Sachs and Morgan Stanley\u2014reviewed the numbers and reached the same sobering conclusion: the Iran war\u2019s knock-on effect on oil prices has almost entirely canceled out the biggest consumer tax windfall in years. For lower-income Americans, the ledger may be in the red.<\/p>\n
The setup<\/p>\n
When Congress passed the OBBBA last year, economists were genuinely bullish. The legislation\u2014retroactive to the 2025 tax year\u2014included no taxes on tips and overtime, a higher child tax credit, a higher standard deduction, an expanded SALT deduction, and a new senior deduction. Even the Committee for a Responsible Federal Budget, the nonpartisan think tank that generally opposes deficit-increasing legislation and has gotten into a war of words with Treasury Secretary Scott Bessent on account of its criticism, acknowledged that it would lead to a \u201csugar high\u201d for the economy, boosting growth in the short term. <\/p>\n
In late 2025 and early 2026, Trump and the White House ran an aggressive promotional campaign around the refund season. On Truth Social in February, Trump wrote that refunds would be \u201csubstantially greater than ever before,\u201d claiming \u201cin some cases, estimates are that over 20% will be returned to the taxpayer.\u201d He urged Americans: \u201cDon\u2019t spend all of this money in one place!\u201d<\/p>\n
The White House formally declared in January that Trump was delivering \u201cthe largest tax refund season in U.S. history,\u201d projecting that average refunds would rise by\u00a0$1,000 or more\u00a0compared to 2025. The House Ways and Means Committee amplified that figure, citing a Piper Sandler analysis projecting $91 billion in total refund growth. Early estimates pegged total consumer tax relief at $135 billion to $150 billion, with Bank of America Research projecting refunds alone running 18% higher than 2025. The theory was straightforward: put cash in Americans\u2019 hands in the first half of the year, and they spend it.<\/p>\n
The refunds are real. Through April 10, federal tax refunds totaled $265 billion\u2014up 16% year-over-year\u2014and the average check clocked in at $3,462, an 11.2% bump. Goldman Sachs estimates total refunds will end the season roughly $50 billion above last year, with additional OBBBA benefits flowing through lower tax payments, for combined relief of $75 billion to $90 billion. Not nothing. But it also isn\u2019t enough, or what was promised.<\/p>\n
The wipeout<\/p>\n
On February 28, U.S. and Israeli forces struck Iran. Within days, Brent crude surged past $120 a barrel as Iran closed the Strait of Hormuz\u2014through which flows roughly 20% of the world\u2019s oil supply\u2014triggering what the International Energy Agency called \u201cthe largest supply disruption in the history of the global oil market.\u201d American gas prices, which stood at roughly $3.54 a gallon in early March, climbed to $4.11 by mid-April.<\/p>\n
Goldman Sachs put a dollar figure on the damage: higher gasoline prices now represent a roughly\u00a0$140 billion annualized headwind\u00a0to household incomes. Morgan Stanley\u2019s math is even blunter at the individual level\u2014a sustained 15% rise in gas prices is all it takes to fully offset the average bump in tax refunds. Prices have risen nearly 40%.<\/p>\n
\u201cRising gasoline prices on the heels of the conflict in the Middle East are likely to neutralize most, if not all, of the anticipated fiscal impulse to household spending,\u201d was the verdict from the Morgan Stanley U.S. economics team, led by Michael Gapen, something reiterated by Heather Berger, another economist on the Morgan Stanley U.S. team.<\/p>\n
Who gets crushed<\/p>\n
The pain is not distributed equally\u2014and the skew is punishing. Higher-income households captured the largest OBBBA benefits through SALT deductions and bracket changes, while the gas price shock hits hardest at the bottom. Goldman Sachs finds that households in the lowest income quintile spend roughly\u00a0four times as much\u00a0on gasoline as a share of after-tax income compared to those at the top. Combined with cuts to Medicaid and SNAP benefits, Goldman now projects real income growth for the bottom quintile of just 0.7% this year.<\/p>\n
Meanwhile, the ceasefire announced April 7 hasn\u2019t fully reopened the Strait of Hormuz, and a U.S. seizure of an Iranian cargo ship last week has kept tensions\u2014and prices\u2014elevated. Several analysts are beginning to wonder if the Strait of Hormuz will ever look the way it used to, before the war.<\/p>\n
Wall Street downgrades the American consumer<\/p>\n
Both banks have revised their outlooks lower. Goldman now forecasts real consumption growth of just\u00a01.2% for 2026\u00a0on a Q4\/Q4 basis\u2014well below the 1.8% Wall Street consensus\u2014with the second quarter expected to absorb the worst of the oil price hit. Morgan Stanley, which already cut its GDP forecast in March and attributed 0.3 percentage points of that downgrade directly to weaker private consumption, projects personal consumption growth of 1.7%.<\/p>\n
In a worst-case scenario where Brent averages $115 a barrel through year-end, Goldman warns overall consumption growth would fall another half-point below its already-lowered baseline\u2014with the biggest cuts concentrated, again, among the lowest earners.<\/p>\n
The Big Beautiful Bill was supposed to be the economic counterweight to tariff uncertainty and a tightening labor market. Instead, a war the U.S. helped start in Iran may have turned Trump\u2019s marquee tax cut into a wash\u2014or worse, a loss\u2014for the very voters it was designed to reward.<\/p>\n
For this story,\u00a0Fortune\u00a0journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.<\/p>\n
#Trumps #war #screwed #Trump #tax #refund #Wall #Street #receipts<\/p>\n","protected":false},"excerpt":{"rendered":"
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