Investopedia Markets News (all except PF)

The steep increase in prices at the pump is weighing on consumer sentiment.
Credit: Graeme Sloan / Bloomberg via Getty Images

Key Takeaways

• An index of consumer sentiment hit an all-time low Friday even as other indicators about the health of the economy showed it staying resilient against the impact of the Iran war.
• Soaring gas prices are influencing people's feelings more than surging stock prices or low unemployment.
• People surveyed for the poll said they were less likely to make major purchases, suggesting high gas prices may force spending cutbacks.

Stocks are booming, unemployment is low, businesses are raking in record profits, and people hate the economy more than at any other time in history.

People's feelings about their own finances and the broader economy as measured by the University of Michigan's Index of Consumer Sentiment edged down in early May, reaching a low point in the history of the survey that began in 1952, the university said Friday. The downtick was driven by a decline in people's assessment of the current condition of the economy, which also hit a record low.

The decline highlighted the glaring contradiction between consumer's feelings about the economy and what the hard data says about it.

Soaring gasoline prices, a consequence of the Iran war, seem to have a much bigger impact on public perception than soaring stock values or other indicators that the U.S. is doing well by most of the ways economists use measure the health of the economy. As of Friday, a gallon of regular unleaded averaged $4.54, well over the $2.98 prewar average back in February. Friday's survey showed this sudden increase in an everyday expense has had an outsized psychological impact.

“Americans don’t like inflation," Heather Long, chief economist at Navy Federal Credit Union, said in a commentary. "They are exhausted after years of high prices, and this latest surge in gas prices to nearly $4.60 is causing a lot of anger."

What This Means For The Economy

The decrease in consumer sentiment doesn't make a decline in consumer spending inevitable, but the gloomy feelings could affect the economy in other ways, and the widespread dissatisfaction could affect how people vote in the upcoming midterm elections.

The drop in consumer sentiment cuts against major economic indicators that show the economy is staying resilient if not thriving. Major stock indexes have shrugged off the war's disruptions to hit record highs. The unemployment rate was 4.3% in April, low by historic standards. Corporate profits as a percentage of the economy hit a record high in the fourth quarter of last year, according to data from the Bureau of Economic Analysis analyzed by The New York Times. Retail sales surged in March to a record high.

The decline of the sentiment index to a record low doesn't necessarily mean households are about to tighten their belts and cut back on spending—ever since the pandemic, consumer sentiment surveys have not been reliable indicators of what people will actually do with their money.

However, some details in the survey suggested household budgets have been squeezed to the point where something is about to give. The survey asks respondents about major purchases they're planning, and that index has also tanked—an ominous sign, according to economists at Pantheon Macroeconomics, who said that sub-index has been a "particularly good guide to growth in consumers’ spending on durable goods" other than cars in recent months.

"A fleeting boost from strong tax refunds and unseasonably warm spring weather probably has obscured a looming drag from the hit to real incomes due to higher gas prices," Oliver Allen, senior U.S. economist at Pantheon, wrote in a commentary. "We expect the spending numbers to look much worse in May and June, as the lift from refunds and the weather fades, and gas prices remain elevated."

Friday's slump dragged shares of Cloudflare into negative territory for the year
Credit: Ina Fassbender / AFP / Getty Images

Key Takeaways

• Cloudflare shares fell sharply Friday after the company announced a plan to lay off about 20% of its workforce, citing AI.
• The news overshadowed first-quarter results that topped estimates.

Cloudflare's stock could be set to lose one-quarter of its value in a single session after the web security company announced a big round of layoffs, citing AI.

Shares of Cloudflare (NET) were down over 24% in recent trading, a day after the firm said it plans to cut 1,100 jobs, or about 20% of its workforce, citing AI-driven changes in how it operates. The news overshadowed first-quarter results that topped analysts' expectations.

Cloudflare reported adjusted earnings of 25 cents per share on revenue that jumped 34% year-over-year to $639.8 million in the first quarter. Both figures were above the analyst consensus compiled by Visible Alpha. The company also lifted its full-year revenue and profit forecasts, though its second-quarter forecast of $664 million to $665 million in revenue and adjusted EPS of 27 cents was just in line with estimates.

Why This Matters to Investors

Cloudflare's plan to cut 20% of its workforce marks the latest in a series of AI-linked layoffs in the tech industry.

Cloudflare said the layoffs are "not a cost-cutting exercise," in a release. Its internal use of AI has grown more than 600% in the last three months, and the company looks to be "intentional in how we architect our company for the agentic AI era," it said.

Still, William Blair analysts said the move could raise worries that Cloudflare "may be experiencing top-line deceleration, hence the decision to take steps to drive margin improvement." However, the analysts suggested they see the restructuring making Cloudflare more efficient.

With Friday's tumble, Cloudflare shares were dragged back into negative territory for the year. They closed at a record high near $257 ahead of last night's earnings.

Iren shares have gained about 60% since the start of the year.
Credit: Cheng Xin / Getty Images

Key Takeaways

• Iren shares jumped Friday after the Bitcoin miner turned data center company announced a new deal with Nvidia.
• Nvidia will spend up to $3.4 billion over the next five years on cloud services from Iren.

Iren's stock is rallying Friday after the former bitcoin miner won a multibillion-dollar deal with an AI giant.

Shares of Iren (IREN) were up over 7% in recent trading after announcing a five-year, $3.4 billion deal with chip leader Nvidia (NVDA). As part of the deal, Iren will provide cloud services for Nvidia's internal AI and research use. Nvidia shares were up nearly 2% on a broadly strong day for U.S. stocks.

Why This Matters to Investors

An expanded deal with Nvidia could be taken as a vote of confidence in Iren's shift from a cryptocurrency mining firm to a provider of AI infrastructure and computing services.

The deal could mean close ties between the companies. Nvidia secured a five-year right to purchase up to 30 million shares of Iren at $70 each, with a total value of $2.1 billion. (The shares recently traded around $61.) Nvidia has made deals to invest in several AI firms in recent months, which has also raised questions about the sustainability of the seemingly circular financing powering the AI sector.

Also on Thursday, Australia-based Iren announced its fiscal third-quarter results, with revenue declining to $144.8 million from $184.7 million the same time last year, as the company transitions to focusing on AI infrastructure.

With Friday's gains, Iren shares have added more than 60% since the start of the year.

This story has been updated since it was first published to add context and reflect market prices.

Jobs Report Blows Past Expectations for 2nd Straight Month

The healthcare sector once again led the way in April, adding 37,000 jobs.
Credit: Suzanne Kreiter / The Boston Globe / Getty Images

Key Takeaways

• U.S. employers added 115,000 jobs in April, more than double the amount that economists had estimated.
• The job market is on track this year for a significant improvement over 2025, which was the slowest year for job creation outside of a recession since 2003.
• The resilient job creation figures takes pressure off officials at the Federal Reserve to cut rates, and gives them room to leave borrowing costs higher for longer to fight inflation.

For a second month in a row, job creation has blown past expectations.

U.S. employers added 115,000 jobs in April, down from an upwardly-revised 178,000 in March, the Bureau of Labor Statistics said Friday. That was more than double the 55,000 forecasters had expected according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. The unemployment rate held steady at 4.3%, relatively low by historic standards.

The performance in March and April was the best two-month stretch of job creation since 2024, and marked a turnaround from February, when the economy lost 156,000 jobs. The first four months of the year put the job market on track for a significant improvement over 2025, which was the slowest year for job creation outside of a recession since 2003.

What This Means for the Economy

The April employment numbers indicate that the job market remains resilient in the face of several shocks, most recently soaring gas prices. The combination of a strong job market and rising inflation will likely keep the Federal Reserve from cutting interest rates any time soon.

Labor Market Stays Resilient

"The evidence is mounting that the U.S. job creation engine is at least stabilizing if not firing on a few more cylinders than it was at the start of the year," Scott Anderson, chief U.S. economist at BMO Capital Markets, wrote in a commentary.

The healthcare sector once again led the way in April, adding 37,000 jobs, with transportation and warehousing picking up 30,000 and retail adding 22,000. The information sector lost 13,000 jobs, while manufacturing continued its downward trend, losing 2,000 positions.

The report suggested the job market is staying resilient against several forces hindering the economy, including uncertainty about tariffs and the spike in gasoline prices from the Iran war, which is pinching household budgets. However, some economists took the good news with a grain of salt.

"While April’s report was generally positive, the progress feels more like a tentative first step than a confident stride forward," Cory Stahle, senior economist at job site Indeed, wrote in a commentary. "While healthcare job gains have remained relatively stable, their growing share of total job creation stems primarily from the collapse in other sectors. When averaged together, the headline numbers seem to be stabilizing. But remove healthcare from the equation, and the US labor market is actually losing more than it is gaining."

Job Strength Likely Keeps Fed on Hold

Still, the higher-than-expected job creation figures may reassure officials at the Federal Reserve that the job market is not at risk of collapsing any time soon, and takes pressure off the central bank to cut interest rates to boost hiring. That may give the Fed breathing room to focus on fighting inflation and keep its benchmark interest rate higher for longer.

The next meeting of the Fed's policy committee is in June, and financial markets widely expect the Fed to hold interest rates flat for the time being under the leadership of incoming Fed chair Kevin Warsh. Financial markets were pricing in just a 5% chance of a rate cut in June, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

"The ebullient employment gains, well in excess of the monthly 20,000 we estimate is the break-even level to hold the unemployment rate steady, along with the jump in inflation due to higher energy prices will keep the Fed holding interest rates steady for a long period of time," Kathy Bostjancic, chief economist at Nationwide, wrote in a commentary.

UPDATE: This article has been updated after initial publication to include comments from analysts and additional context.

News of the day for May 8, 2026

The S&P 500 and Nasdaq Composite are on track to post gains for the sixth consecutive week.
Credit: Michael Nagle / Bloomberg / Getty Images

Stock futures are gaining ground Friday, while oil prices are holding steady amid uncertainty over the state of the ceasefire in Iran; the nonfarm payrolls report is expected to show that job growth slowed in April, as the economy faces risks including high gas prices caused by the war; Cloudflare shares are tumbling despite strong earnings as the company announced plans to cut about one-fifth of its workforce; shares of CoreWeave are also lower after the cloud computing provider posted a larger-than-expected loss for the first quarter; and Block shares are rising after the CashApp and Square parent topped Wall Street earnings estimates and lifted its profit forecast. Here's what you need to know today.

Stock Futures Rise After Pulling Back From Record Highs Yesterday

Stock futures are higher this morning as investors digest another big batch of earnings and await key data on the labor market (more on that below). Futures tied to the S&P 500 and the tech-heavy Nasdaq were recently up 0.5% and 0.8%, respectively, while Dow Jones Industrial Average futures added 0.3%. The S&P 500 and Nasdaq touched all-time highs yesterday before finishing the session lower amid uncertainty about the prospects for an end to the Iran war.

WTI futures, the U.S. crude oil benchmark, were holding steady at around $95, after briefly dropping below $90 yesterday before rising as reports emerged that Iran attacked U.S. ships in the Strait of Hormuz. President Trump said in response the U.S. attacked launch sites in Iran, but again insisted that the weeks-long ceasefire is still in place. Gold futures were up less than 1% at $4,730 an ounce, while bitcoin hovered around $80,000. The yield on the 10-year Treasury ticked lower to 4.38%.

April Jobs Reports Coming This Morning

Investors will get their latest look at the health of the U.S. labor market with the highly anticipated release of the April jobs report. The report from the Bureau of Labor Statistics, due out at 8:30 a.m. ET, is expected to show that the U.S. added about 55,000 jobs last month, down from a higher-than-expected 178,000 in March, according to economists. The unemployment rate is seen holding steady at 4.3%. Experts have said today's report will be key in determining whether last month's report was the start of an improving job market, or just a temporary bump. The job market has alternated between adding and losing jobs in the last year as tariffs, the Federal Reserve's late-2025 rate cuts, and now worries over the Iran war and significantly elevated gas prices have all affected the economy in their own way.

Cloudflare Stock Tumbles as Restructuring Outweighs Earnings Beat

Shares of Cloudflare (NET) are sinking after the cloud services provider announced better-than-expected revenue and earnings for the first quarter, but also unveiled a major restructuring plan. Cloudflare said it expects to eliminate about 1,100 jobs, more than 20% of the 5,156 full-time employees Cloudflare said it had at the end of 2025. The company said its own internal use of AI has grown more than 600% in the last three months, and said they need to be "intentional in how we architect our company for the agentic AI era."ll. Cloudflare shares were down 15% ahead of the opening bell.

CoreWeave Stock Sinks on Wider-Than-Expected Loss

CoreWeave (CRWV) shares are also falling this morning after the cloud provider reported a wider-than-expected loss. CoreWeave said late Thursday it generated $2.08 billion in revenue in the first quarter, more than doubling year-over-year, while reporting a net loss of $1.40 per share, larger than the analyst consensus compiled by Visible Alpha. Shares of Nvidia (NVDA)-backed CoreWeave had surged leading up to the report, rising 80% since the start of the year. The stock has tracked a broader rally in AI stocks and also benefited from new deals the company has announced with AI hyperscalers. Shares were down 7% in recent premarket trading.

Block Stock Rallies On Solid Results, Raised Profit Outlook

Block (XYZ) shares are rising after the financial technology company beat Wall Street estimates for the first quarter and lifted its full-year outlook. Block said after the bell Thursday that it earned an adjusted 85 cents per share on $6.06 billion in revenue, each above the analyst consensus. Block, which owns the payments platform CashApp and Square credit card readers, said it now expects to generate adjusted EPS of $3.85 this year, which would be 62% growth from 2025 and is up from its previous forecast of $3.66. The company made headlines earlier this year when it announced plans to cut 4,000 of its roughly 10,000 employees, citing changes brought on by AI. Block shares were up 7% recently, and are poised to open at their highest level since last November.

Shares of HawkEye 360 soared Thursday after the company went public.
Credit: Michael Nagle / Bloomberg via Getty Images

Key Takeaways

• Shares of HawkEye stared trading on the New York Stock Exchange under the symbol "HAWK" on Thursday. The stock popped about 30% on its debut.
• Its successful launch likely shows the anticipation for Elon Musk's SpaceX IPO—and demand for space stocks broadly.

Investors may have to wait a bit longer for the SpaceX IPO—but they seem to be shopping for space stocks in the meantime.

HawkEye 360, which landed on the New York Stock Exchange under the symbol "HAWK" today, popped in its trading debut. The company, which uses satellite technology to provide signals intelligence to the U.S. government and its agencies, appears to have caught the eye of investors looking for ways to lift off ahead of the big space IPO—Elon Musk's SpaceX—they're waiting for: HawkEye shares opened at $31.50, roughly 20% above their IPO price, and closed over 30% higher even as major benchmark indexes finished the day in the red.

The defense firm's IPO, which raised about $416 million, suggests that there's momentum behind new issues tied to space, a theme investors are increasingly looking to plumb. (There are a number of ways to invest in the space economy now: Here's Investopedia's take on some of the options.) The precise timing of the SpaceX IPO, expected to raise tens of billions of dollars and, perhaps, mint a new trillion-dollar company, isn't yet known, though it's expected this summer.

Herndon, Va.-based HawkEye was founded in 2015 by a team of military veterans, engineers, and national security technologists, according to the company. It derives more than 60% of its sales from the U.S. government. Last year, it reported total revenue of around $118 million and net income of $2.7 million. At its closing price, HawkEye was valued at over $3 billion. The company had previously suggested it might go public at $24 to $26 per share; it ended up going public at $26.

Meanwhile, Rocket Lab (RKLB), which provides launch and other space services, rose in post-market trading today after reporting a revenue beat for the first quarter and a new multi-launch contract.

Measures of consumer sentiment have lost their usefulness as indicators of the health of the economy

Consumer spending and retail sales increased to record highs in recent months.
Credit: Jeffrey Greenberg/UCG/Universal Images Group via Getty Images

Key Takeaways

• Measures of consumer confidence and sentiment have lost their ability to predict trends in consumer spending and other aspects of the economy, economists say.
• Consumer spending has continued to rise even as sentiment scrapes all-time lows.
• One possible explanation: people are unhappy about having to take on extra work to keep up with rising prices.

Ever since the pandemic, the U.S. public has been saying how bad the economy is while buying more and more stuff.

A pair of research studies have shed light on the increasing disconnect between how we talk about the economy and how we vote with our dollars. Since 2020, there's been barely any correlation between consumer sentiment—how people feel about their own finances and the economy, based on surveys—and consumer spending, according to an analysis this week by market research company Big Chalk, and a separate paper by researchers at the Federal Reserve last week.

The divergence was stark in March, when the University of Michigan's widely-watched consumer sentiment index—a measure of how people feel about their own finances and the economy based on a survey of U.S. adults—plunged well towards its lowest since the history of the survey launched in 1952. That same month, consumer spending and retail sales increased to record highs according to the Bureau of Economic Analysis and the Census Bureau. The studies suggest that measures of consumer sentiment have lost their usefulness as indicators of the health of the economy.

Before the onset of COVID-19, the University of Michigan's Consumer Sentiment and the Conference Board's Consumer Confidence indexes were used by economists and investors to help forecast consumer spending in the coming months. When the public felt pessimistic about the economy, people tended to tighten their wallets. That no longer is the case according to the studies. Big Chalk analyzed 50 years of data on consumer sentiment and confidence and found that the the Conference Board's survey was a good indicator of employment trends, but that neither of the major surveys had any real connection to consumer spending or inflation.

What This Means For The Economy

Measures of consumer sentiment and confidence aren't good indicators of what people will actually do with their money, at least for the time being.

"These numbers are probably really only useful for telling you how consumers feel emotionally in the moment," Rick Miller, a partner at Big Chalk’s Marketing effectiveness practice, told Investopedia in an interview. "But as far as predicting spending, predicting inflation, they don't seem to have much usefulness."

Fed researchers did a deeper dive into the data, tracking the spending of 10,000 individual households to see how their survey responses compared to their spending decisions. Remarkably, people who said the economy was bad or that prices were too high actually increased their spending, even after taking inflation into account.

"What consumers have been saying differs from what they have been doing during the post-pandemic period," researchers led by Sinem Hacioglu Hoke wrote. "Consumers say they feel worse, but through the end of 2024, they are buying more – not just spending more – than they did in 2019. This disconnect between what consumers have been saying and doing suggests that consumer sentiment surveys on their own have become weaker indicators of future consumer behavior and of the health of US consumers."

What changed during the pandemic? The Fed researchers said it might have something to do with the burst of high inflation that started in 2021 and has yet to fully dissipate. Although overall household incomes have more than kept up with price hikes, the Fed research found people were changing jobs, taking on extra work to keep up with rising prices, and the more they did those things, the worse they felt.

"Although sentiment improves with higher incomes, the more people said they had to make changes to their behaviors since 2019 to reduce spending, the worse is their sentiment," they wrote.

The Big Chalk analysis didn't pinpoint reasons behind the disconnect. Miller speculated people's perceptions are increasingly shaped by social media, which tends to be politically polarized and inflammatory when it comes to economic news.

"The news seems more alarmist, even if the facts themselves are not," Miller said. "When queried on sentiment, People react to how they feel, and not necessarily what is objectively happening on the ground."

Higher memory costs stemming from the AI data center boom caused Apple's product profit margins to contract last quarter.
Credit: Eric Thayer / Bloomberg via Getty Images

Key Takeaways

• Smartphone shipments declined in the first quarter, a trend that's expected to continue this year as soaring memory costs force price hikes and weigh on consumer demand.
• Demand for memory and data storage hardware has soared over the past year due to the feverish AI data center buildout.
• Consumers buying lower-end models are expected to feel the most pressure this year, with premium phone makers such as Apple relatively insulated by their supply chain leverage and pricing power.

The AI-driven memory shortage may show up in smartphone prices soon.

Executives at Arm Holdings (ARM) warned on the chip designer’s earnings call Wednesday evening that smartphone demand could decline this year as a memory shortage pushes up prices. “We're going to continue to see very flattish, maybe slightly negative numbers for the overall market,” said CEO Rene Haas of smartphone volumes this year. 

Counterpoint Research estimates global smartphone shipments declined 6% in the first quarter as the memory shortage “disrupted supplies and increased costs” for manufacturers. According to International Data Corporation, which estimates shipments fell 4%, last quarter’s decline broke a 10-quarter growth streak for the smartphone market.

Why Is This Important

The AI data center boom has caused demand for a variety of industrial inputs and products, ranging from Nvidia GPUs to electricity, to surge. The most pressing bottleneck today—a memory shortage—is expected to eventually spill over into consumer electronics prices.

“This decline in shipments is primarily driven by memory players prioritizing AI data centers over consumer electronics,” which has compressed smartphone makers’ margins and forced them to raise prices to offset higher component costs, said Counterpoint senior analyst Shilpi Jain. 

The prices of digital memory and data storage hardware have soared over the past year due to surging demand from AI data centers. Flash memory supplier Sandisk (SNDK) last week reported its sales to data centers tripled quarter-over-quarter. Tech giants, eager to get a leg-up on their competition in the AI arms race, are paying hefty premiums to secure memory supply. Sandisk and memory peers such as Micron (MU) and Western Digital (WDC) are following the money, and that’s padding their bottom lines. Sandisk’s profit margin was 78% last quarter, up from 51% in the fourth quarter of 2025 and 23% a year prior. 

The shortage hasn’t affected all smartphone makers equally. “In several emerging markets, prices have risen by as much as 40–50%, significantly weighing on demand in price‑sensitive regions,” said Nabila Popal, senior research director for Worldwide Consumer Devices at IDC. Chinese smartphone maker Xiaomi saw shipments decline nearly 20% due to "its heavy exposure to the price-sensitive entry-level segment," according to Counterpoint.

Apple (AAPL), on the other hand, sold 3% more iPhones last quarter than the prior year, according to IDC estimates. The company last week reported iPhone revenue increased nearly 22% in the first quarter. 

Granted, Apple isn’t impervious to higher memory costs. CFO Kevan Parekh on the company’s earnings call last week attributed its narrowing profit margin on products to “a seasonal loss of leverage and higher memory costs.” But its “ultra-premium positioning and highly integrated supply chain,” are helping to take the edge off, according to Counterpoint. 

Bank of America analysts last week said Apple could offset memory costs by raising prices on its next batch of high-end iPhones, which already start at $1,100. The iPhone, they said, is “a relatively price inelastic product,” meaning Apple can raise prices without meaningfully hurting demand. 

Analysts don’t expect the memory shortage or its pressure on smartphone sales to let up soon. “The outlook for 2026 remains weak, as the memory crunch may last until late 2027,” according to Counterpoint. 

Memory troubles could even reshape the smartphone market over the next couple of years. IDC expects the memory shortage to accelerate the market’s drift toward high-end models with higher prices and wider margins. “The premiumization trend will continue even as the memory prices are expected to stabilize by the second half of 2027,” IDC analysts wrote. 

Paul Tudor Jones says these are "crazy times" in markets.
Credit: Adobe Stock

When will the music stop for the AI trade? Maybe not before the "crazy times" have passed.

The renewed investor taste for chip makers and companies supplying materials and equipment for data center builds has driven the S&P 500 and the tech-heavy Nasdaq Composite benchmarks to new records lately. Investor appetite for anything to do with artificial intelligence has even pushed companies with ostensibly little to do with it— like struggling sneaker makers—to pivot toward the trend. And hedge fund billionaire Paul Tudor Jones, of Tudor Investment Corp. is buying— at least for now.

WHY THIS MATTERS TO YOU

Though AI stock valuation concerns were more dominant last year, some expert investors are still warning of a possible bubble in AI stocks.

"I bought more AI stocks," Jones told CNBC on Thursday, saying he invested in a basket of them rather than choosing winners or losers. These, he said, are "crazy times" reminiscent of the period right before the Dotcom Bubble burst.

Jones likened the current vibe —marked, he said, by the January debut of Anthropic's Claude Code tool—to when Microsoft in 1981 rolled out MS-DOS 1.0 for IBM's personal computer, citing beginning of what he called "productivity miracles."

A massive efficiency boom has yet to materialize in the AI age, but investors are excited about the prospects, and picks-and-shovels companies' are benefitting—they're showing outsize growth this earnings season—from mega tech companies spending to build out their capabilities. That's continued to lift tech shares to highs, placing investors in a precarious position where they may wonder constantly just how much further things can climb.

Indeed, Jones warned that the AI trade won't rally forever, saying it likely had "another year or two to run." After that, he said, investors are likely to see "one of those breathtaking corrections." Jones has seen those before, too: He made his fortune shorting the 1987 stock market crash.

Conservative critics of the new bill say it further complicates the tax code.
Credit: South Agency / Getty Images

Key Takeaways

• A proposed Senate bill would eliminate federal income tax for individuals earning $46,000 or less.
• The bill would fund these tax cuts by introducing higher tax rates for individuals earning over $1 million.

A bill recently introduced by Senate Democrats would eliminate federal income taxes for individuals earning $46,000 or less and lower them for those making up to $80,500.

The Working Americans' Tax Cut Act, introduced March 12 by Sen. Chris Van Hollen, D-Md., and Sen. Mark Kelly, D-Ariz., has 19 Senate cosponsors. Rep. Don Beyer, D-Va., has introduced a companion bill in the House. It would create an alternative maximum tax that caps the tax liability of low- and middle-income earners.

To fund these tax cuts, the bill would establish new marginal tax rates for those earning more than $1 million.

What This Means For You

The new Senate bill would cut taxes primarily for middle-income earners and tax millionaires to offset the cost. The bill was recently referred to the Senate Committee on Finance, but it would need to pass both chambers and be signed by the president.

“Far too many Americans are working hard for their paychecks but still having trouble making ends meet. These Americans who are earning just enough to get by ... should not have to pay a federal income tax,” said Sen. Chris Van Hollen (D-MD) in a press release.

The alternative maximum tax would set an exemption—$46,000 for single filers, $92,000 for joint filers—and cap the tax owed on income above that exemption at 25.5%. Single filers earning less than $46,000 would owe no federal income tax.

The alternative maximum tax would work in tandem with the existing taxation system. "A filer would compute their tax under both the standard tax schedule and the alternative maximum. If the alternative produces a lower figure, they pay that amount instead," according to an analysis by the Yale Budget Lab.

Here's how that would work. Take a single filer earning $66,000. Under the bill's cap, they would subtract the $46,000 exemption from their income, leaving $20,000. Their tax bill would be capped at 25.5% of that amount: $5,100.

Under the present system, the same filer would subtract the $16,100 standard deduction, leaving $49,900 in taxable income, and owe about $5,800 based on the 2026 marginal brackets. Because that exceeds the $5,100 cap, they would pay $5,100, saving about $700.

The right-leaning National Taxpayers Union called the changes overly complicated. "The alternative minimum tax is the kind of confusing mechanism that legislators should be working to excise from the tax code," its analysis argued.

Not every filer would qualify for the cap. Only filers with incomes below 175% of the exemption ($80,500 for single filers) would qualify.

"This provision would benefit relatively few people among the poorest 20 percent or richest 20 percent of Americans and would mainly benefit the middle 60 percent," according to an analysis by the Institute on Taxation and Economic Policy, a left-leaning think tank. "Many people among the poorest 20% would not benefit because their income tax liability is already zero."

The bill would offset most of the cost through a new surtax on millionaires. The Tax Foundation estimates the alternative maximum tax would reduce federal revenue by about $1.6 trillion over a decade, while the surtax would raise about $1.5 trillion, leaving a net cost of $86 billion over 10 years.

Single filers earning more than $1 million would pay an additional 5% on income between $1 million and $2 million, 10% between $2 million and $5 million, and 12% on income above $5 million.