January 31, 2024
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 Governor's Budget Projections. Monthly PIT withholding for January came in $1 billion (11 percent) below projections included in 2024-25 Governor's Budget.
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: Recent Withholding Has Been Underwhelming. The figure below shows percent change in monthly income tax withholding compared to the same month of the prior year. After several stronger months, withholding growth trailed off in December (up 1 percent over December 2022) and January (down 1 percent from January 2023).