Weekend Tax Payments Tallied

This morning we received two additional data points on California’s tax receipts.  For April 7, which includes funds received during the weekend, retail sales taxes totaled about $20 million, the highest daily number so far this month and nearly double the number recorded after last week’s three-day weekend/holiday.  Estimated taxes totaled $136 million, which appears to be somewhat on the softer side.  Including these latest two figures, California’s revenues from its tops three tax sources—personal income, corporate, and sales taxes—are at $64.5 billion for the fiscal year to date.

Tax tracker records collections in the three major taxes. Are there other revenues that are deposited in the General Fund?  Levies on insurance, alcohol and horse racing are General Fund revenue sources.  Interest on unclaimed property is deposited in the General Fund.  Proceeds from levies of the VLF and property tax are not, as they are considered “local” taxes. Last week, the state completed the third quarter of the fiscal year. 

Playoffs Tonight

While the NCAA tournament may be on the minds of many, California’s revenue watch is on a full court press as the critical tax season begins.  A word of caution should be mentioned about preliminary estimates made with initial data feeds from the reporting agencies: While the preliminary numbers for the first four days of April tallied tax receipts from California’s three major revenue sources at about $1.5 billion, revised numbers put the total at $830 million.  The variance could also easily be positive on the state’s behalf, but analysts should not overreact to early estimates.

 

April Tax Receipts Hit $1 Billion

Preliminary numbers for April 4 indicate a solid number for personal income taxes, supported by a robust number for withholdings.  Employers reported $412 million in withholding taxes for the day, bringing the month-to-date total to $1.0 billion.  Estimated tax and final tax payments were essentially equal to refunds, so that total net personal income tax payments also came in at about $1.0 billion for April 1-4. 

The interest in the income tax returns was not always so great.  Thirty years ago, when the state relied more heavily on sales tax revenue, budget watchers were more concerned about holiday sales receipts reported in December and January.  Now, as expected, corporate tax and retail sales made little additional contribution to the revenue aggregate of California’s “big three” tax sources, leaving the total at about one billion dollars for the first few days of the month. This is a good first milestone for April.

Taxpayers have about two weeks to complete their tax returns. So much of the state’s General Fund depends on collections of the income tax. No wonder April tax returns are of interest.

With just three days of final numbers, refunds are exceeding payments, but this should soon change. Preliminary numbers show a strong number for withholding for April 4 ($412m).

Updated figures posted for yesterday, April 3 ($184m for PIT, 18.6m corp and 16.7m sales).

More on corporate tax receipts and trends

The state has collected $75.9 million in corporate taxes in the first few days of April, with today’s revenues expected to bring the month-to-date total to $86 million, $78.7 million ahead of projections.  Actual corporate revenues through the year to April 2nd are also ahead of projections, continuing the trend of a strong start to month of April.

The first ten working days of April typically provide little predictive information about how much taxpayers will file when their taxes come due.   Last year, for example, the Franchise Tax Board reported that 60 percent of the entire income tax collected in April during a four-day period starting April 15.

On April numbers...

While the salaries and wage base assists budget experts project future revenue performance, other aspects of the income tax returns might not have as much predictive power.  Most notably, the portion of tax base known as “unearned income” is less stable.  This portion of the tax base, which can include dividends and investment earnings, is subject to a great deal of year-to-year variations, depending on changes in taxpayer conditions and the business cycle.  Often, investment earning may not become subject to taxation unless the taxpayer chooses to recognize the gains.  He or she may choose to offset these gains against other investment losses.   And all this activity tends to be concentrated on a small percentage of taxpayers.  Given the range of variables that can affect the unearned income category, no wonder it is hard for budget writers to predict capital gains activity. 

April 3 starts well

By 10 a.m. this morning, the State totals for the big three taxes totaled $64.2 billion, with an estimated $288.5 already reported today.

April 2014 tax reporting not only helps budget writers monitor actual receipts for the 2013 tax year, it informs their thinking about the likely taxpayer behavior in 2014. So it helps them model likely tax receipts in April 2015. For example, it tells them something about the likely tax base. More than 60 percent of all income tax collections are derived from wages and salaries. If the 2013 tax returns show an increase in the wage and salary base, it is likely that the increase will continue in 2014.