County Income Tax Distributions Down Nearly 50%

The Comptroller’s Office has released its August local income tax distributions – which have decreased from last year by 47.7 percent.

This is primarily because the number of relevant pay periods for significant withholders has differed in previous years, says Pharita (Jan) Akbhavasut of the Revenue Administration Division – indicating that this decrease is, effectually, “artificial.”

From her email:

The August local income tax distribution for counties totals $54.7 million, a decrease of 47.7%.  This distribution includes two reconciling distributions–the balance of second quarter 2018 withholding and estimated payments and the reconciling distribution for tax year 2017.  Year over year withholding growth in the second quarter, ignoring complexities related to this distribution, was 4.1%, consistent with recent trends.  Timing issues related to the number of pay periods in past quarters had caused volatility in the year over year withholding numbers.  However, those timing issues appear to have passed.   This is likely the cause of a significant portion of the decline in the distribution; last year’s reported withholding growth for the August distribution was artificially elevated by the aforementioned timing issues.

The second quarterly distribution is based on withholding and estimated tax collections attributable to the second quarter of 2018 less amounts already distributed (projected April/May withholding and estimated payments distributed in June and projected June withholding distributed in July).  This component of the distribution is effectively one-third of projected estimated payments for the second quarter, and a reconciliation of actual withholding and actual estimated payments for the entire quarter to projections from May and June.  This means the size the component depends on the variance of actuals from the estimate, and the amounts already distributed.  While this component decreased 49.4%, to $44.2 million from last year (Table 2), the cumulative distribution so far for tax year 2018 grew 2.3%, to $2.111 billion, from the same point in time last year (Table 3).

If you have any questions about the distribution, please contact Debora Gorman of the Revenue Administration Division at (410) 260-7451 or Pharita (Jan) Akbhavasut at (410) 260-7501.

Here is her email from last year:

The August local income tax distribution for counties totals $104.6 million, an increase of 40.9%.  This distribution includes two reconciling distributions–the balance of second quarter 2017 withholding and estimated payments and the reconciling distribution for tax year 2016.  Year over year withholding growth in the second quarter, ignoring complexities related to this distribution, was a relatively strong 5.7%.  This is likely due to timing issues related to the number of pay periods in a quarter for some large withholding payers.  The number of pay days in a given quarter can change from year to year.  This is likely the cause of the high growth rate for 2017Q2. While we cannot be certain, we believe that pay period timing has served to distort quarterly growth rates relative to true underlying growth for all quarters from 2015Q4 to 2016Q3.  As a result of those anomalous periods, each subsequent year-over-year comparative period is impacted. Withholding growth in 2016 Q2 was weak, at 1.7%, and has served to boost the growth figure for 2017 Q2 by comparison.

The second quarterly distribution is based on withholding and estimated tax collections attributable to the second quarter of 2017 less amounts already distributed (projected April/May withholding and estimated payments distributed in June and projected June withholding distributed in July).  This component of the distribution is effectively one-third of projected estimated payments for the second quarter, and a reconciliation of actual withholding and actual estimated payments for the entire quarter to projections from May and June.  This means the size the component depends on the variance of actuals from the estimate, and the amounts already distributed.  While this component increased 55.2%, to $87.5 million from last year (Table 2), the cumulative distribution so far for tax year 2017 grew 5.0%, to $2.063 billion, from the same point in time last year (Table 3).

Links to Income Tax Distribution Tables for Counties

August 2018 Counties Tables

August 2017 Counties Tables

August 2016 Counties Tables

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