Strong October for state income taxes
Most of the revenue overage, so far, is already spoken for in the California budget
Preliminary data from California’s tax agencies shows that personal and corporate income taxes, combined, outpaced 2024 state budget projections for the month of October by $1.3 billion (16%). For the 2024-25 fiscal year to date, the income taxes are running $5.3 billion (15%) above budget projections. (In addition, 2023-24 General Fund revenue receipts were $3.2 billion above 2024 state budget projections.)
The vast majority of the revenue overage to date is already spoken for in the state budget—for example, to address:
school funding obligations (including maintenance factor accumulated due to the suspension of the Proposition 98 guarantee in 2023-24)
costs from new ballot measures approved by voters
costs due to savings efforts in the 2024 budget that fail to materialize
future unfunded costs shown as operating deficits in the 2024 budget multiyear budget projection from the Department of Finance.
Moreover, the upcoming changes in the federal executive and legislative branches obviously may result in changes to programs that affect the state budget. In addition, the Governor recently proposed a significant expansion of the film and television tax credit.
Later this month, the Department of Finance’s Finance Bulletin will include authoritative information on October revenues, including income, sales, and other taxes.
In October, the bulk of the positive income tax news resulted from personal income tax withholding being $655 million (8%) above projections (or 14% above October 2023 levels). Some taxpayers made final payments on 2023 returns with extensions in October, and those final returns were $248 million (17%) above projections. Personal income tax refunds were $443 million (17%) below projections. Net corporate income tax receipts offset this good news for the state budget, as these receipts were $197 million (70%) below projections. (October is a minor month for corporate income taxes.)
For the 2024-25 fiscal year to date, withholding is $1.1 billion (4%) above projections, and quarterly estimated personal income tax payments are $1.7 billion (65%) above projections. Overall, the personal income tax is $4.1 billion (13%) above projections, and the corporation tax is $1.2 billion (33%) above projections.
Revised on November 13 to reflect small net upward adjustment in October results.