00:00Tax refunds are going to be bigger than usual this year, $90 to $100 billion bigger.
00:05Treasury Secretary Scott Besant has been saying this will bring on a non-inflationary boom,
00:10but that doesn't entirely compute.
00:12First, $90 to $100 billion is just 0.3% of U.S. GDP.
00:18Second, most of the money will be going to people in the top third of the income distribution,
00:23who are more likely to save it than spend it.
00:25The refunds are thanks to a bunch of tax breaks included in last summer's budget bill.
00:29The One Big Beautiful Bill Act.
00:31The biggest breaks by far are a new tax deduction on up to $12,500 per person in overtime pay
00:38and an increase in the amount of state and local taxes you can deduct on your federal tax return
00:43from $10,000 to $40,000.
00:45Almost all the new tax breaks disappear above a certain income level.
00:49They're targeted at the middle class.
00:51But as this chart shows, the benefits are still going primarily to those in the upper third of the income distribution.
00:57Because people in the bottom two-thirds pay very little in federal income taxes.
01:02Low-income Americans are the most likely to spend their refunds immediately.
01:06But they'll be getting only a tiny share of this year's refund bonanza.
01:09If the more affluent Americans getting the big refunds save most of the money or use it to pay down debt,
01:15as seems likely, the immediate economic impact will be smaller.
01:19It's still nice to get a big refund.
01:21No argument there.
01:23But if the goal was to stimulate the economy or help the people who are struggling most,
01:27this wasn't the best way to do it.
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