Due to rising gas prices resulting from the Iran War, the significant tax breaks afforded to Americans as a result of President Donald Trump’s One Big, Beautiful, Bill Act are effectively canceled out, Reuters reported Friday.
The president’s premier second-term piece of legislation, which he signed into law on July 4, 2025, notably included tax deductions for tips and overtime pay, as well as several other additional tax relief provisions, which helped increase the average tax refund by 11.1% or $351 from 2025 to 2026, according to IRS data as of March 27. The estimated increase in the amount Americans are paying at the pump from 2025 to 2026, however, is more than double this amount, according to Reuters.
Skyrocketing oil prices due to the war were projected to cost the average American an additional $857 for gas annually, the outlet reported, citing March 23 estimates from the Stanford Institute for Economic Policy Research. Thus, even after factoring in the new law’s benefits as reflected in IRS tax refunds, Americans are still paying about $500 more for gas annually, not considering the prices of other commodities that have skyrocketed due to the war.
The national average price for a gallon of gas on Saturday was $4.14, according to the American Automobile Association (AAA), more than a dollar over the $2.98 the same gallon of fuel cost Feb. 28, the first day of Operation Epic Fury. Even during the war’s ongoing two-week ceasefire — which Vice President JD Vance has dubbed “fragile” — traffic in the Strait of Hormuz remains at a virtual standstill. Before the conflict, about 20% of the world’s oil demand flowed through the strait.
The Stanford Institute’s estimate was notably calculated with the assumption that the waterway would open on Friday, something which did not happen. This means the actual increase in how much money the average American spends on gas from 2025 to 2026 could be much higher than $857, depending on how long the strait remains effectively shut.
In addition, some analysts say it may take a considerable amount of time for global energy markets to stabilize, even after the war is permanently over.
“I believe we have seen the last of sub-$3.00 per gallon gas prices and sub-$80 per barrel oil prices, at least for the remainder of my lifetime,” David Blackmon, an energy industry veteran, told the Daily Caller News Foundation on Monday.
The statistics come as Trump is set to arrive in the battleground states of Arizona and Nevada in the coming weeks to talk about his signature law’s tax cuts, Punchbowl News reported Thursday.
Republicans, who passed the sweeping legislation with no Democratic support, have heavily highlighted its tax breaks while making their case for the midterm cycle, seemingly shaping up to be a particularly tough one for the GOP. Some Republicans have recently rebranded the law as the “Working Families Tax Cuts Act” to this effect.
The issue of affordability has particularly dominated the 2026 midterm campaign, as wartime prices continue to remain high.
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