Washington, D.C. — U.S. Treasury Secretary and IRS Commissioner Scott Bessent recently made a bold prediction that is stirring discussions in both Washington and Wall Street. He anticipates that the American economy will see extraordinary growth in early 2026, especially benefiting working families.
“I think the economy is going to go gangbusters,” Bessent told Fox Business host Larry Kudlow. He credits this optimism to anticipated large tax refunds, an increase in purchasing power, and the positive effects of recent tax reforms.
His remarks come amid ongoing inflation concerns and uncertainties with the Federal Reserve, but they are backed by internal IRS data. “I am also the IRS Commissioner, so I can see what’s going on at the IRS,” he noted, indicating that working Americans will receive substantial tax refunds.
Bessent suggests that this anticipated surge in refunds will result from a blend of tax code changes enacted during the Trump administration and many wage earners’ habit of over-withholding. Many workers have not adjusted their W-4 forms, leading to a situation where they have paid more than necessary in taxes. He predicts this will cause a “windfall effect” in early 2026 as the IRS processes refunds.
“In the first quarter of 2026, working families are going to see very good refunds coming out,” he stated. “They will change their withholding… they will get real wage increases.”
The tax reforms expected to contribute to this boost include the elimination of federal income tax on tips and overtime, Social Security income, and a new deduction for auto loan interest on American-made vehicles. Despite some scrutiny regarding their long-term budget impact, Bessent emphasizes the immediate benefits for consumers.
By using IRS and Treasury data, Bessent pointed out that many workers have not revised their withholding forms in light of these changes. Hence, they have been unwittingly providing the government with an interest-free loan throughout the year. This trend is likely to reverse as taxpayers receive larger refunds, allowing them to hold onto more of their earnings moving forward.
This sequence—large refunds followed by increased take-home pay—may lead to sustained improvements in consumer spending power well into 2027. Bessent believes this transition will support overall economic growth and stimulate business investment.
“I think 2026 and 2027 are going to be great years,” he confidently asserted.
However, Bessent’s optimistic outlook does face challenges. With inflation still present, the September 2025 Consumer Price Index (CPI) indicated that 72% of goods in the index are rising at rates above the Federal Reserve’s target. Yet, he did not shy away from these concerns; instead, he presented a counterpoint based on current trends.
“Energy prices are down,” he said, suggesting that CPI figures “should start coming down, either the next month or the month after that.”
The road to reduced inflation remains uncertain. The Department of Labor’s delay in the September CPI report increases the unpredictability surrounding the Federal Reserve’s interest rate decisions at a sensitive time when markets seek clear indicators of price stability.
Analysts have noted that due to the limited economic data stemming from these delays and a federal government shutdown, the Federal Reserve will rely more heavily on outdated or incomplete information. This scenario heightens the importance of each CPI release, making it critical for monetary policy decisions. While Bessent acknowledged the awkward timing, he maintains a positive outlook based on the trend of declining energy prices.
Meanwhile, the broader economy continues to progress. Data from Q3 2025 showcased steady business investment, a 2.8% annual increase in real consumer spending, and a 3.3% uptick in business shipments. Even with a dip in federal employment linked to the government shutdown, GDP growth projections have improved. Economists polled by The Wall Street Journal revised expected GDP growth for the third quarter to 2.7% annually, up from 1.0% in July.
This statistical resilience bolsters Bessent’s enthusiasm. Decreased inflation coupled with rising disposable income could sustain the current economic expansion. Nevertheless, labor shortages driven partially by immigration enforcement efforts may exert further pressure on wages, complicating the inflation landscape.
Importantly, Bessent’s optimism is rooted in the tangible benefits working Americans may see reflected in their paychecks and tax forms within months. By Q1 2026, many families could be looking at refunds several thousand dollars higher than usual—especially impacting those who earn hourly wages, rely on overtime, or work in tipped positions. These groups have been among the hardest hit by inflation in recent years.
According to IRS data, these workers have yet to adjust their withholding, leading to unexpectedly generous refunds. Once received, it’s anticipated that many will better align their withholding, increasing their monthly income rather than waiting for a lump sum each April. The combination of these changes could lead to sustained increases in disposable income.
Even as some fiscal conservatives express skepticism about the implications of tax cuts and potential deficits, Bessent stands firm in his predictions. “Things look great,” he reiterated during his Kudlow interview.
Ultimately, only time and continued economic data will reveal whether Bessent’s optimistic forecasts hold true. Nevertheless, his message is explicit: there appears to be a real financial improvement on the horizon for working families, starting with their tax returns for 2025. As the New Year approaches, all eyes will closely monitor fiscal policies and the economic conditions affecting working Americans, eager to see just how “gangbusters” the economy can become.
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