High-income residents in Democratic-leaning states are poised to get unusually large tax refunds early next year, thanks to the relaxed cap on state and local tax deductions https://t.co/3ImkRjPLVG ...

Core Points - The US ended fiscal year 2025 with a lower deficit-to-GDP ratio than the previous year, with expectations for continued improvement in 2026 [1][2] - The deficit as a percentage of GDP is projected to decrease from 6.5% to 5.9%, marking a significant reduction [2] - Treasury Secretary Bessent anticipates substantial tax refunds for lower-end consumers due to changes in tax withholding schedules [4] Fiscal Outlook - The Treasury has not released the exact fiscal 2025 deficit-to-GDP figure due to a government shutdown, but estimates indicate a positive trend [2] - Bessent expressed optimism for 2026, suggesting it could be a strong year for both corporate and consumer economies [5] Tax and Consumer Impact - The recent tax bill is expected to lead to higher take-home pay for consumers, particularly benefiting the bottom 50% [4] - Changes in tax withholding are anticipated to result in increased disposable income for lower-income households [4] Banking Industry Dynamics - The Trump administration aims to lower capital requirements for mortgages and corporate credit, shifting lending back to banks from non-banks [5][6] - The current regulatory framework post-2008 financial crisis is seen as a threat to community banks, which have experienced a significant decline in market share [6][7] Community Banks - The share of outstanding bank loans held by community banks has decreased from 27% to 20% since the financial crisis [7] - The creation of new community banks has drastically reduced, averaging only six per year since 2010 compared to over 100 annually before the crisis [7]