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 November came in $806 million (10 percent) below projections included in 2024-25 Budget Act. For the fiscal year overall, 2024-25 PIT withholding is running about even with budget act projections, which targeted 5 percent growth over the prior 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 and has been on solid footing since then.
Recent Trends: PIT Withholding Collections Continue Solid Stretch. The figure below shows the latest monthly trends for income tax withholding. Each bar represents a snapshot of how income tax withholding for the prior 12 months compares to the year before. This viewpoint helps filter out some of the month-to-month variation in income tax withholding that makes interpreting trends difficult. So far this fiscal year, the trailer 12-month total of income tax withholding has been trending up between 5 percent and 7 percent.
Adjusting for Thanksgiving Week Timing, Recent Collections Have Shifted Into Higher Gear. Comparing monthly income tax collections is always complicated by timing issues, but especially so this month with the uncommonly late Thanksgiving holiday week. This means end-of-month bonus pay and holiday bonuses were remitted to the state in early December, rather than late November per usual. The figure below takes a broader look that captures the full recent window of collections. This view suggests that income tax collections during the November period (that spans the week following Thanksgiving, whether that falls in November or December) came in perhaps 20 percent higher than last year. This would represent a growth uptick relative to what we have seen over the past six to nine months (which were running consistently about 6 percent above prior year levels).