September Personal Income Tax Receipts Beat Predictions
Income tax collections for September appear to have exceeded the nearly $4 billion expected by state budget writers.
Although a relatively small factor in determining whether up to $2.5 billion in triggered spending cuts – almost $1.9 billion to public schools — will need to be imposed in January, meeting revenue estimates certainly doesn’t worsen the state’s fiscal situation.
Once final numbers for the month are made public, September may further brighten the budget picture.
Less-than-anticipated revenue from other tax sources could erase the gains from the higher-than-expected income tax collections, however.
Gov. Jerry Brown’s Department of Finance estimated the state would collect nearly $7.3 billion from all revenue sources during September.
That makes it the largest revenue month prior to the Brown administration creating the budget plan it will unveil in January for the fiscal year beginning July 1, 2012.
Of the $7.3 billion, sales tax receipts were expected to be $1.4 billion. Another $400 million was to come from various smaller-ticket taxes like those on alcohol, cigarettes and insurance companies.
Bank and corporation taxes would total, $1.1 billion.
And $4 billion in personal income tax collections.
Slightly more than $1 billion in bank and corporation taxes was collected in September, according to the Franchise Tax Board’s monthly tally. Just over $116 million in refunds was sought.
There are two types of personal income tax payments.
Withholding is the monthly money subtracted from employee paychecks and sent to the state to cover annual taxes.
Estimated payments are made by taxpayers in anticipation of their tax obligation the following April 15.
As a budget move, the state changed the percentage of estimated payments due quarterly from four payments of 25 percent each to 30 percent in April, 40 percent in June and 30 percent in December.
There is now no estimated payment due in September.
However, a large chunk of state taxpayers aren’t aware of the law change or choose to continue paying because a September federal quarterly payment is still due.
Because of that, the Department of Finance admits its projected amount of estimated tax payments for the month is an educated guess – at best.
This year, the department predicted $969 million in estimated income tax payments for September – slightly lower than the $1.1 billion received last year.
Instead, the $969 million estimate turned out to be almost $600 million lower than the $1.55 billion actually received by the Franchise Tax Board.
Requests for refunds were $183 million — $14 million less than predicted.
Withholding payments received were expected to be almost $3 billion.
As of September 26, the Employment Development Department, which collects withholding, reported $2.6 billion on hand.
Combining the $2.6 billion in withholding and the $1.55 billion in estimated payments tops $4.1 billion – more than $100 million above the projected September income tax totals.
Filed under: Budget and Economy
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