February income taxes 25% short of projection

Signals revenues may be $4.5 billion below projections for 23-24 at end of February

February personal and corporate income taxes paid to the Franchise Tax Board (FTB) and the Employment Development Department fell $1.2 billion (25%), net, below the administration’s January 10 budget projection, principally due to unexpectedly large corporate tax refunds ($796 million more than projected) and a $412 million shortfall in personal income tax (PIT) withholding.

The Department of Finance already adjusted monthly forecasts through May in an effort to account for the IRS’s January 10 announcement of a delay in quarterly and final payment deadlines, which affect when taxes are paid to FTB, principally by high-income filers. Accordingly, a large majority of the February shortfall came in categories unrelated to the IRS deadline extension.

PIT refunds were $476 million below projections for the month of February, at least temporarily offsetting shortfalls in other revenue categories.

As of the end of January, General Fund revenues were $3.3 billion net (3.2%) below the administration’s January 10 projections for the 2022-23 fiscal year to date. Accordingly, pending information on January receipts of the sales tax and other revenues, it is possible that revenues will be around $4.5 billion (about 4%) below the fiscal year projections as of the end of February. (The March edition of the Finance Bulletin later this month will include the best information on all of the February revenue totals.)