Tax refunds are up. Americans still paid higher taxes
As President Donald Trump heads into the midterms with hopes that large tax refunds will buoy the Republicans in elections, most Americans will have already had any cash returned from their taxes eaten up by higher prices from a year of Trump’s tariffs.
According to IRS data, the average tax refund jumped about 11% between 2024 and 2025, rising from an average of $3,116 to about $3,462. While the $350 difference is a decent windfall for many households, the increase is already outpaced by the taxes Americans paid via higher prices due to Trump’s tariff policy, with most estimates finding the average household has effectively paid upwards of $1,000 in tariffs, and one congressional estimate finding that a typical household has paid upwards of $1,700 in tariffs.
Alex Durante, a senior economist at the conservative-leaning Tax Foundation, told Salon that the 11% increase in tax refunds also obscures the reality for most Americans: that the tax cuts resulting from the One Big Beautiful Bill Act passed last year will likely amount to an extension of the tax cuts from Trump’s first term, rather than further tax cuts.
This means that larger refunds are likely the result of overwithholding from the first part of 2025 in anticipation of the sunsetting of the Tax Cuts and Jobs Act of 2017, rather than a year-over-year reduction in their tax rate. The people who did receive a significant tax cut in the Beautiful Bill account for a much more narrow portion of the population: seniors on Social Security, tipped workers and people who earned a lot of overtime in 2025. The tariffs, on the other hand, have been paid by Americans across the board, anyone buying imported goods or goods made with imported components.
“The lower incomes elsewhere in the economy due to tariffs also means other forms of taxes are collecting less money.”
“Those are going to reduce incomes across the distribution, and it’s going to be more felt by those in the lower and middle incomes, because they’re the ones that are disproportionately paying for a lot of the tariff goods,” Durante said.
Even though the Supreme Court struck down the bulk of Trump’s unilateral tariffs in late February, the financial pain persists. Though many corporations are seeking refunds for the tariffs, consumers are unlikely to see a dime of it. Instead, it’s likely to be the businesses that directly paid the tariffs, or the investors who bought up the rights to tariff refunds from the businesses, with the sons of Commerce Secretary Howard Lutnik being among the most high-profile of these investors.
Durante also pointed out that Trump’s budget cuts, which were used to pay for part of the tax cut extensions, hit doubly hard for low-income Americans. The administration not only effectively raised prices via tariffs, but also gutted services like Medicaid and food stamps.
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Josh Bivens, the chief economist at the Economic Policy Institute, pointed to Federal Reserve data to underline the discrepancy between the tariffs Americans have paid versus the refunds they are seeing this year. A February report found that the federal government collected about $180 billion more in customs duties in 2025 compared to 2024. Tax refunds, however, are only up about $25 billion over the same time period. Bivens said, if anything, looking at strictly the tariffs collected underestimates the increased prices paid by consumers.
“This understates the costliness to U.S. households though, because tariffs also allow non-importing firms to raise their prices if they’re competing with imports,” Bivens said. “And, the lower incomes elsewhere in the economy due to tariffs also means other forms of taxes are collecting less money. So this $180 billion overstates how much revenue they’re bringing in.”
Dean Baker, a co-founder of the Center for Economic and Policy Research, told Salon that even groups that did get real tax cuts are not seeing as big of a difference as they’d hoped when Trump was on the 2024 campaign trail. For example, Trump’s no tax on overtime provision actually just applies to the overtime premium workers make, meaning if a worker makes “time-and-a-half” on overtime, it’s the “half” part that is not taxed, rather than the full amount paid for the overtime hours. So if someone makes $20 an hour and $30 overtime, only $10 of that would be untaxed.
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Similarly, only about half of Social Security beneficiaries paid tax on their Social Security income. That’s because that income was subject to income taxes, like most other income, and so tax cuts on Social Security income go disproportionately to seniors in higher tax brackets.
“Even when you get that tax-free, say you get $1,000 tax free. Okay, that’s great. That’s $120 off your taxes. But it’s just not going to go very far. And the tariffs are being paid by everyone,” Baker said. “So, for most people, what they’re paying in tariffs is going to outweigh what they might have saved on taxes on tips or the tax on overtime.”
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