April Closes in the Black

Although the numbers are subject to revision overnight, preliminary figures show that California's three major revenue sources -— personal income, corporate, and sales taxes -– totaled $13.2 billion for April. This was $125 million above estimates for the month, or 1%.

Personal income taxes tracked estimates closely, missing projections by $36 million, or just 0.3%. Retail sales taxes were also close to target receipts, missing estimates by a tiny $8 million, or 1%. In contrast, corporate taxes contributed a positive variance of $170 million, or 11%.

The performance of California's revenues during April puts the year-to-date margin above projections by $1.7 billion. Final numbers released in less than 24 hours will show the exact margin, but a cushion of $1.7 billion is a good sign for California.

Also of note: Compared to Los Angeles, San Francisco's taxed wealth showed a different distribution. In 2011, FTB reported that about 3,000 of San Francisco's 300,000 taxpayers had adjusted gross income exceeding $1 million. Of the $42.7 billion of total AGI reported by SF taxpayers, these “millionaires” had $12.5 billion (29 percent). They were assessed tax of $1.0 billion (41 percent) -— out of the $2.6 billion —- assessed on San Francisco taxpayers.

So when compared to LA County, the SF taxpayers with $1 million AGI represented the same tiny proportion of taxpayers, but they had a greater share of the county’s AGI and tax assessments.

Withholding Bolsters Personal Income Taxes

As numbers are tallied for this last day of April 2014, the focus will be particularly on personal income taxes (PIT).  While the first two days of this week have been a little disappointing, PIT is still running ahead of estimates for the month.

Gross PIT derives from two critical sources. In addition to the April push from estimated and final tax payments, withholding payments paid throughout the year by companies on the behalf of their employees are a primary revenue source. For the period, April 1-29, withholding amounted to $3.7 billion, or close to a third of gross personal income taxes.

While not as volatile as final tax payments impacted by swings in capital gains, movements in employment, wages, and salaries are also subject to the economic cycle. Fortunately, withholding remittances this year reflect the ongoing recovery in California’s economy.

Also of note: Capital gains are not the only "volatile" aspect of the income tax.  Withholding payments can vary from year to year and month to month.  Just as one example:  Looking at withholding payments made in April 2011 through 2013, withholding payments rose from $87.8 million in April 2011 to $125.8 million in the next year and $167.8 million in April 2013.