Income taxes from 2024 fuel strong April
How much will Trump's economic choices hurt California revenues in 2025, beyond?
In Total, April Income Taxes Beat Projections. Preliminary tax agency data shows that California’s personal and corporate income taxes, combined, generated $23.4 billion of revenue in April, net of refunds. This exceeds the forecast for the month—included as part of the Governor’s January 10 budget proposal—by $488 million (2.1%).
2025 Estimated Payments Lagged Projections. 2024 final return payments to the Franchise Tax Board (FTB)—related to 2024 economic activity (before the current federal administration took office)—generated the April gains. 2024 final return payments were $1.6 billion (29%) above projections for the month. By contrast, most other income tax categories were weaker than projections, including the first quarterly estimated personal income tax payments of 2025, which were $245 million (8%) under target.
Some Los Angeles County Payments Will Come in October, Not April. Considering that the January forecast assumed timely receipts from Los Angeles County filers, whose income tax deadlines were extended to October due to the wildfires, April totals can be viewed as fairly healthy. More Los Angeles taxes that ordinarily would have been received by FTB in April are likely to show up in October instead, presumably to be booked mostly to the 2024-25 fiscal year. Even with the Los Angeles County delay, total income taxes in April 2025 were $2.7 billion (13.0%) more than received in April 2024, including withholding from employees’ paychecks, which was $410 million (5.3%) above April 2024 levels.
2024-25 State Revenue Strength To Date. For the 2024-25 fiscal year to date, California’s income taxes are $3.8 billion (3.0%) above projections as of the end of April. As of the end of March, income tax gains were offset by sales taxes running more than $300 million below projections. The first few billion of added General Fund tax revenues in 2024-25 may be required to go to schools to pay down Proposition 98 “maintenance factor” due to last year’s action to suspend schools’ minimum funding guarantee. Other revenues—principally federal cost recoveries for prior years—were running above projections as of March, likely due to earlier-than-expected receipts of some of those funds.
LAO Notes March and April Withholding Has Moderated. The Legislative Analyst’s Office notes that last winter’s uptick in personal income tax withholding growth has “moderated a bit in March and April.
Recession Risk Now Significant. Due to the new federal administration’s various economic decisions, recession risk now is elevated. Weaker tax revenue growth in 2025-26 appears quite possible, if not likely. Coupled with cost increases being reported by state departments, this probably will increase projected state deficits significantly beginning in 2025-26. Big augmentations of the state budget above levels proposed in the Governor’s January budget plan appear unlikely. State budget cuts, funding delays, borrowing, and other budget-balancing measures almost certainly will be required beginning in 2025. Federal budget actions in the coming months are expected to worsen existing state budget deficits, such that state backfills of federal cuts generally will not be feasible.
May Revision Imminent. Pursuant to state law, the Governor must submit the annual May Revision of his proposed budget to the Legislature on or before Wednesday, May 14. New revenue and spending projections and updated proposals to balance the 2025-26 budget are expected.
A link to LAO’s withholding tracking post was added on May 6, 2025.