May Income Taxes Beat Forecast. Preliminary data from the state’s tax agencies show that May 2025 personal and corporate income tax revenues beat the May Revision projections for that month by $700 million (8.0%), with $602 million of the gain resulting from better-than-projected final, extension, and quarterly estimated personal income tax (PIT) receipts. The remainder resulted largely from lower-than-projected corporation tax (CT) refunds.
Withholding Growth Has Been Moderating. As the Legislative Analyst’s Office recently noted, the “winter uptick in PIT withholding growth has moderated.” PIT withholding was up $271 million (3.3%) from last May, but fell just short of the May Revision estimates for the month of May 2025.
Personal Income Taxes Up Over Last May. Overall, net PIT receipts for the month totaled $8.2 billion, up 11.1% from May 2024. Net CT receipts were $1.3 billion, down 7.9% from last May.
Stock Market Way Up, But Economic Concerns Remain. The May Revision forecasts largely were completed in April, and as a result, the May Revision economic forecast assumed that the S&P 500 stock index would average about 5,400 for the rest of this year. That was roughly the level of the S&P 500 in the middle of April, a couple of weeks after the White House made its bizarre announcement of worldwide tariffs. Stock prices, however, have risen in recent weeks as announced tariff levels have eased. As of Friday, June 6, the S&P 500 closed at 6,000, or 11% above the May Revision assumption for the rest of this year. As a result, revenues in the coming months may beat May Revision estimates by billions of dollars, despite the real risk of recession, which obviously would take state revenues in the opposite direction over the next year or two. Sluggish job growth in early 2025 is a concern for the state’s economy. For the nation as a whole, job growth in the technology sector has flat lined, a trend that can affect California’s job growth and revenues.
Continuing Strong State Cash Position. The healthy revenue results for May should help support the state’s strong overall cash position, which, as I noted recently, was used by the Governor to moderate the magnitude of budget reductions in his May Revision proposal.
Final Data for May Will Differ. Due to technical issues, the preliminary data from the tax agencies omits the May 30th daily tally from tax agencies, perhaps affecting both refunds and receipts. As a result, when the final data is received for May, the numbers for the month will be a bit different from what is shown above.