Matt Trivisonno looks at real time payroll withholding taxes on a year over year basis. He calls it the “greatest economic indicator of all time.

The first chart shows that federal withholding-tax collections declined to an annual growth rate of 3.4% in the second quarter from a rate of 5.1% in the first quarter.



However, due to the way the calendar works, that deceleration is likely exaggerated. The second chart shows the second-derivative of the growth rate. It plots the Q/Q rate each day for the quarter ending on that date. And since the nature of the calendar causes this calculation to also be spiky, I have add a 10-bar moving average to smooth things out (red line).




So, as you can see, the true growth-rate looks to be steady at around 4%.  That’s a respectable rate, though nothing to write home about.

We have seen a number of economic indicators portraying slowing-growth.

However, the withholding-tax data is not yet exhibiting any sign of job losses.

Note: The first two quarters of 2012 on the first chart look much stronger than those of 2011, but that is only because there was a big tax-cut in 2011.


Matt Trivisonno

Category: Data Analysis, Taxes and Policy


8 Responses to “Federal Withholding-Tax Collections Decline in Q2”

  1. Stuart says:

    you can take those budget deficit forecasts for this year and next and toss them out the door. They’re way too low.

  2. mathman says:

    i agree with Stuart.

    here’s an interesting read too, but on other stuff, some of it related to the topic:

  3. DarthBeta says:

    The Federal Government does not run on revenue. Any Federal collection or expenditure is a US Treasury credit or debit to the accounting logs. All federal taxes are paid to the Treasury and the Treasury adjusts the accounting log as appropriate. Decreases in taxes can actually be simulative (provided the government is spending) to the economy as there is more money in the system. Federal taxes do not function as a source of revenue (for the federal govt), they serve to control inflation and the value of currency. The system being supported, raise taxes, cut spending, yet presumably keep the money supply high is actually destructive to US based, $paid citizens. Your programs are cut, more of your money is sent back to the US Treasury (as a federal tax), yet holders of USD that are not taxed enjoy the benefits of this; Banks, Non US, people using tax havens ect

  4. [...] What do federal tax withholdings show?  (Big Picture) [...]

  5. DarthBeta says:

    @ stuarts- every US recession has been proceed by a surplus.
    Deficits are not a bad thing, the important part is how we allocated the accounting notes

  6. RC Exclusive says:

    Confusing use of calculus terms here. The data being displayed is not “the second-derivative of the growth rate.” The growth rate, which is what is being shown here, is in fact the first derivative of the data. The second derivative would be a chart showing the acceleration, which is not being shown here. “The second derivative of the growth rate” would be the derivative of the acceleration, which is not shown here, nor would it be particularly meaningful.

  7. willid3 says:

    every recession. except the current one. we didn’t come into it with a surplus this time around

  8. Rick Caird says:

    Charles Biderman at TrimTabs talks about the withholding data to be a much more accurate and much more real time look at employment that the monthly BLS employment situation report.


    BR: You obviously are not familiar with Biderman’s track record. It is nothing short of spectacularly awful: