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. Withholding on stock options has made up a growing share of collections in recent years.
October Withholding Came in Well Above Budget Projections and Last Year. Monthly personal income tax withholding for October totaled $9.9 billion, about $1.3 billion (15 percent) above budget projections. October withholding was 11 percent higher than October of last year. October likely got a boost from withholding on restricted stock unit (RSU) payouts at two large technology firms that have seen their stock price (and therefore RSU payouts) rise roughly 30 percent since last October.
Underlying Growth Trend Holding Steady. The figure below shows recent monthly trends for income tax withholding. Each bar represents a snapshot of how total income tax withholding for the prior 12 months compares to the same period one year before. This perspective helps filter out some of the month-to-month volatility in withholding that can make underlying trends difficult to interpret. The trailing 12-month total rose slightly from 7 percent to 8 percent in October. The 3-month total (a closer but noisy gauge of recent trends) for August, September, and October is up about 9 percent from the same period last year (partly due to the relatively slow July month rolling out of the three-month window).