California employers make regular income tax withholding payments for their employees. These amounts are reported every weekday, providing a real-time indication of the direction and magnitude of aggregate change in the employers’ payroll. Most withholding payments are for employees’ wages and salaries, but withholding is also due on bonuses and stock options received by employees.
Compared to Recent Projections. Monthly PIT withholding for May came in $1.2 billion (17 percent) above projections included in 2024-25 Governor's May Revision. Overall, PIT withholding is running about 6 percent above last year.
Broad Trend: PIT Withholding Has Regained Ground Since Late 2022. Total personal income tax withholding declined sharply during the second half of 2022 and early 2023, as shown in the figure below. Due in part to stock price increases at California's biggest technology companies (as we discussed in this post), withholding regained some ground beginning in mid-2023.
Recent Trends: May Withholding Was Unambiguously Strong. The figure below shows percent change in monthly income tax withholding compared to the same month of the prior year. May 2024 withholding come in $1.5 billion (22 percent) above the prior year. Although May withholding sends an unambiguously strong signal, the monthly cash total did benefit from some tailwinds related to prior year accrual timing and a few extra major collection days. These tailwinds likely account for about half of the increase above prior year levels.
May Withholding Strength Concentrated in the Final Week of May. For the first three weeks of May, it appears that May 2024 withholding was on track to slightly exceed May 2023 totals. Then, from May 22nd through the end of the month, this year's collections surpassed prior year trends substantially. Over the final eight collection days of May 2024, the state took in $3.5 billion in withholding, nearly $1 billion more than the final eight days of May 2023.