When New York State’s first-quarter tax receipts came in nearly $800 million above the 2011-12 financial plan forecast last week, I warned in this space that the anemic 1 percent year-to-year quarterly growth in personal income tax (PIT) withholding payments was “grounds for concern” about the state’s economic outlook. On closer inspection, however, it turns out the quarterly withholding number was a bit misleading.
According to sources in the state Department of Taxation and Finance, withholding collections back in April 2010 were inflated by some unusually large payments by a few large employers. Sure enough, PIT withholding receipts for April 2011 were actually 8 percent lower than the previous year, pulling down the total for the entire quarter ending June 30.
That sort of thing happens from time to time, which is why tax receipts trends cannot always be taken at face value. Another bit of occasional “noise” in withholding tax numbers is the number of Fridays (i.e., paydays) in a month. An additional Friday in a given month will also artificially pump up or deflate the year-to-year number.
On a more positive note: in the month of June alone, year-to-year withholding receipts were up a healthy 4.5 percent over June 2010, which would be consistent with a solid (if not roaring) economic recovery. (The June calendars for 2010 and 2011 line up, with the same number of Fridays in each, and there were no other anomalies reported in collections.)
Today’s “tepid” GDP estimate is another story, of course, lending credence to Comptroller Thomas DiNapoli’s warning last week that “our fiscal health is tenuous” in light of macroeconomic trends.