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.
March Withholding Came in Near Recent Budget Projections and Up Substantially From Last Year Due to Stock Price Rebound. Monthly personal income tax (PIT) withholding for March totaled $11.5 billion, $84 million (less than 1 percent) above projections included in the Governor's Budget. March withholding was 12 percent higher than its level in March of last year. Year-over-year growth in March likely got a boost from heightened Broadcom Restricted Stock Unit (RSUs) payouts. Broadcom's stock price is up 60 percent since last March, when federal tariff announcements led to a brief drawdown, meaning RSU payments made to its employees on March 15 would have been up a similar amount from the prior year. (Withholding payments to the state show up a few business days after the RSU payment date.) March also included the state's largest ever single withholding day ($1.5 billion on March 19), again coinciding with income tax withholding on Broadcom's RSU payouts.
Despite Slight Deceleration, Withholding Remains a Revenue Bright Spot. 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 of income tax withholding had been hovering near 10 percent growth but has decelerated to roughly 7 percent since January. Zooming in at the recent deceleration more closely, 3-month total withholding for January, February, and March is up a more modest 4.3 percent from the same period one year earlier.