By Sabrina Escobar

Wealthier shoppers, and the retailers that cater to them, stand to be the main winners as President Donald Trump's new tax bill jolts the economy with bigger refunds for people across the economic spectrum.

The One Big Beautiful Bill Act, signed into law in July, includes several provisions that will lead to heftier payments, including an increase to the SALT deduction cap, no tax on overtime and tips, and additional deductions for seniors. It adds up to a potentially considerable boost for consumer demand.

The Treasury Department estimates that tax refunds will increase by an average of $1,000 per household in 2026. A group of analysts at BofA Securities estimate that a combination of those larger checks and smaller tax payments could leave consumers with an extra $135 billion around tax season.

That works out to about 0.4% to 0.5% of gross domestic product. Refunds alone should increase by about $100 billion.

"We see a growing set of potential tailwinds for the consumer, including higher expected tax refunds, which leaves us incrementally more constructive on the outlook for the year," wrote Ashley Owens, an analyst at KeyBanc Capital Markets who covers softlines retail.

While households across the income spectrum are expected to benefit, the spoils won't be shared equally, experts say. Higher- and middle-income families will get a disproportionate share of the pie. BofA economists note that many of the bill's measures are deductions, making them more valuable for households with more taxable income that pay higher tax rates on that income.

Meanwhile, lower-income households typically have tax bills that are already very low, leaving less wiggle room to reduce what they owe through deductions, the BofA analysts note. Plus, some of the benefits accrued by lower-income households -- particularly no tax on tips or overtime work -- may eventually be offset by reductions in welfare, such as Medicaid and SNAP benefits.

These dynamics could reinforce the so-called K-shaped economy, writes Tobin Marcus, an analyst at Wolfe Research. The phrase describes how higher-income households seem to be thriving -- fueling growth at the top of the K -- while lower and middle-income consumers are hurting, pulling them into the lower end of the K.

The distribution has several important implications on how the stimulus will trickle its way through the economy.

BofA economists forecast that only about half of the tax-season consumer stimulus will actually get spent in the near term, given that higher-income households are less likely to spend windfall cash and more likely to invest it.

Whatever wealthier consumers do spend tends to be directed toward discretionary areas rather than staples, notes a team of Bernstein analysts led by Zhihan Ma. That presents an opportunity for brands whose customer bases skew toward middle- and high-income clients, such as Tapestry, TJX, and On Holdings, as well as Costco Wholesale and Walmart's Sam's Club, they added. Walmart's recent inroads among higher-income households means the company's main brand could also benefit from the extra cash, the analysts wrote.

That said, lower-income households will still get a share of the extra refund money, albeit a smaller slice. Bernstein says the off-price chains Ross Stores and Burlington Stores, a Barron's stock pick, stand to benefit from that more modest surge in spending power. Evercore ISI's Greg Melich favors Five Below.

The bill may be big, but for retailers, the beauty will remain strictly in the eye of the high-end beholder.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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January 24, 2026 02:00 ET (07:00 GMT)

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