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Bottom Line: California income tax withholding appears to have stabilized, with aggregate collections over the past five weeks almost exactly matching the comparable weeks in 2019.

California employers are required to make regular income tax withholding payments for their employees, which can provide a real-time indication of the direction and magnitude of the aggregate change in the employers’ payrolls. Most withholding payments are for employees’ wages and salaries, but withholding is also due on bonuses and stock options received by employees. We caution against giving too much weight to withholding numbers in any given week because a single anomalous day can result in numbers that are difficult to interpret. Nonetheless, given the pace and severity of the shift in the state’s economy resulting from the COVID-19 pandemic, tracking weekly withholding is worthwhile as a way to assess the state’s rapidly changing economic situation.

The first graph compares withholding payments received this week to payments received in the comparable week in 2019, which ran from Monday, June 17 to Friday, June 21 of that year. Withholding was down 2 percent from the comparable week in 2019. The daily collection pattern was much smoother than in 2019.


The second graph compares the year-over-year percent change in withholding (withholding this week relative to the same week in 2019) to the weekly changes observed from March through June of 2009, when the state was in the depths of the Great Recession. The comparable week during the Great Recession showed a 32 percent decline from the same week in 2008. It appears that withholding has bottomed out much earlier in the cycle than it did in 2009.

The final graph shows total withholding collections since Monday March 23, when we first started to see evidence of an impact of the pandemic on withholding. As shown in the graph, total collections between March 23 and June 19 are down 3.1 percent ($520 million) compared to 2019. This is a notably smaller gap than four weeks ago, when it stood at 5.5 percent ($656 million).


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