Click to enlarge:

 

Matt Trivisonno writes:

“At this point of the year in 2010, the Treasury Department had collected $459.6 billion in withholding taxes from the paychecks of American workers. Now in 2013, the amount stands at $545.9 billion – up $86.3 billion or 18.8%. (We compare to 2010 because there was a payroll “tax holiday” in 2011 & 2012).

An 18.8% growth rate over three years is pretty respectable in an era of scant wage inflation. Even more impressive is the recent trajectory of the growth rate. In the chart above (“3-Year-Growth”) you can see that the rate surged all throughout March. The chart plots the 10-day moving average of the growth-rate to give us a look at the second-derivative. As you can see it was “up, up, and away” during March.

So, the odds of a disappointing jobs report on Friday seem very low.

If a weak number is reported, the odds favor it will likely be revised upward in the future. The consensus forecast among economists is for only +193,000 jobs, which is substantially lower than the 236,000 added in February.

That forecast appears to be excessively gloomy in light of the withholding-tax data, perhaps setting the stage for another upside surprise. On the other hand, the stock market was strong during March, so perhaps it has already priced in the news.

 

Source: Daily Jobs Update

Category: Data Analysis, Employment, Taxes and Policy

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10 Responses to “Withholding-Tax Collections Surge Higher in March”

  1. Scott Frew says:

    Barry, fyi, Nick Colas in his BNY Convergex note last night weighed in on the tax season from another angle:

    The odd news, which could swing good or bad in the coming weeks, is that individual tax refunds are still running below last year’s levels. That’s an unexpected twist, given that higher levels of employment over the past year should have boosted personal income levels and, therefore, increased refunds. Yet with just two weeks until Tax Day, refunds are $12.3 billion lower than last year, or 6.0%. Sources in the tax preparation industry tell us that ‘This is the weirdest tax season’ they’ve ever seen and even the IRS is wondering why taxpayers due a refund are waiting so long to file.

    • rd says:

      The delays in Congress regarding tax policy meant that the IRS and the tax preparers were not prepared to have tax returns done until a month into tax preaparation season. I waited an extra 2-3 weeks longer than I normally would to do my taxes because I figured there would still be lots of computer programming snafus in February that would need cleaning up and updating (which there were).

      I would expect April to be very intense for the IRS.

      If Congress did their job properly and actually set tax policy before the tax year starts instead of after it ends, then I would expect to see more normal filing practices.

  2. ashpelham2 says:

    There has also been a lot of news regarding the IRS being behind on processing and refunds, so I’m sure a lot of folks just didn’t feel compelled to file earlier. The USPS is getting have a big day on April 15. I have efiled my Fed for the first time in years, as I grew tired of paying for a tax software to do it for me, for “free”. This year, due to some of my own tax complexities, felt it would be better. Since I owe the sorry state I reside in, they will get theirs on April 15.

  3. Livermore Shimervore says:

    I’m always amazed at how quickly the IRS are at depositing a return (when there is one due) into my checking account after filing the return. Given the magnitude of filings they receive it’s mind-boggling.
    But I also find that because they are so quick about giving me back my shekels that I’m not so prompt about filing for the return once January arrives. Also, I ditched TurboTax/H&R online for the last two years and actually hired a CPA. Big improvement, less stress, more value.

  4. [...] –Tax Collections Barry Ritholtz quotes Matt Trivisonno on the uptick in withholding tax collections. “At this point of the year in 2010, the Treasury Department had collected $459.6 billion in withholding taxes from the paychecks of American workers. Now in 2013, the amount stands at $545.9 billion – up $86.3 billion or 18.8%. (We compare to 2010 because there was a payroll “tax holiday” in 2011 & 2012). An 18.8% growth rate over three years is pretty respectable in an era of scant wage inflation. Even more impressive is the recent trajectory of the growth rate. In the chart above (“3-Year-Growth”) you can see that the rate surged all throughout March. The chart plots the 10-day moving average of the growth-rate to give us a look at the second-derivative. As you can see it was “up, up, and away” during March.” [...]

  5. I concur on the improving data. Corrected for reporting period noise, March Real GDP is gauged to be 2.0%, up from 1.6% in Dec.

    GDP outlook charts: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  6. Sarge says:

    On the other hand my chicken blood and finger bones predict a continued recession, in spite of the Administration’s desperate attempts to “stimulate” the economy. Just sayin’

  7. [...] this week mostly soft — ADP and new jobless claims both disappointed, counterbalanced by Payroll Tax Withholding which was way up in March.  The consensus of economists is for a net gain of 190,000 workers in [...]

  8. tandembicycling says:

    Perhaps one of the reasons withholding is up is because of the mix of income earners. If high-end earners are up, it will have a disproportionate impact on withholding.

  9. [...] report came in at +88,000 – missing expectations by a mile. However, the day before on ritholtz.com, I [...]