September 2015 Income Taxes: Above Governor's Projections
October 15, 2015
The Department of Finance now has released an updated version of this month's Finance Bulletin, the key monthly document for tracking state budgetary revenues.
"Big Three" Taxes End September Around $500 Million Above Year-to-Date Projections. California's "Big Three" General Fund taxes (the personal income tax [PIT], the sales and use tax, and the corporation tax) combine to make up nearly all General Fund revenues. As of September 30, the Big Three taxes are running about $500 million ahead of the Governor's projections for the 2015-16 fiscal year to date, as shown above. Nine months remain in this fiscal year, including the current month of October.
Personal Income Taxes Well Above Monthly Projection. The Governor's budget projection assumed that General Fund PIT collections in September would equal a net amount of $6.21 billion. Net General Fund PIT collections for the month actually totaled $6.70 billion, or $486 million above the Governor's projections for the month. (This monthly amount was up 10.9% [$660 million] from the total collected last September.)
September PIT collections come largely from PIT withholding and PIT estimated payments, which are described below.
- PIT Withholding. PIT withholding, largely from workers' paychecks, totaled $4.0 billion for the month. While the Governor's revenue projection assumed PIT withholding in September would be up 2.5% ($92 million) from the same month last year, actual collections from workers' paychecks and other withholding sources were up 9.1% ($336 million).
- PIT withholding collections for the 2015-16 fiscal year to date are up 8.0% over the same three months in 2014-15. For the remainder of this fiscal year, the Governor's revenue projection assumes that PIT withholding is 3.4% above last fiscal year's levels. Even if actual withholding totals for the rest of this fiscal year are up just 6% from last year's levels, this would generate withholding amounts exceeding the Governor's projections by another $1 billion during the rest of 2015-16.
- PIT Estimated Payments. Estimated payments, largely from high-income tax filers, totaled $2.5 billion for the month. While the Governor's revenue projection assumed these estimated payments in September would be up 5.0% ($112 million) from the same month last year, actual collections were up 12.6% ($279 million).
- If, hypothetically, estimated payments for the key collection months of December 2015 and January 2016 also end up 12.6% above last year, this would mean that estimated payments alone for just those two months would be about $900 million above the Governor's revenue projection, not counting any other gains in withholding and other PIT sources during the rest of this fiscal year.
Corporation Taxes Below Monthly Projection. The Governor's budget projection assumed that net corporation tax collections in September would total $972 million. Net corporation tax collections for the month actually totaled an estimated $868 million, reflecting some large refunds that were not assumed in the monthly projection. Therefore, corporation taxes were $104 million below the Governor's projections for the month.
Sales Taxes Below Monthly Projection. Preliminary agency cash collection data from the State Board of Equalization indicates that September General Fund sales tax collections totaled $1.925 billion, or $63 million below the Governor's revenue projection for the month.
The next updates of our office's General Fund revenue outlook are expected to be released on or about Wednesday, November 18 in the annual LAO Fiscal Outlook publication.
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