Posted on July 30, 2025
We estimate that federal tax withholding–the combined amount of income and payroll taxes withheld from workers’ paychecks and remitted as quickly as the next day to the U.S. Treasury Department–grew by 6.4 percent in July compared to the amount from July of a year ago (see chart below). That is close to the 6.9 percent growth measured in June–representing healthy rates of growth in each of the past two months. Indeed, for almost all of the past two years plus, we have measured monthly withholding growth in the range of 4.5 percent to 7.5 percent.
Economywide federal tax withholding tends to move with overall wages and salaries in the economy–barring tax law changes or certain other events. Thus, we expect that the overall labor market remained relatively stable in July. However, preliminary data from the National Income and Product Accounts (the NIPAs that measure GDP and its components) have showed economywide wages and salaries growing in recent months at a lower rate than our estimate of withholding growth. We are waiting until September for the next release of the more complete data that are used to estimate NIPA wages and salaries, with potential revisions back to the beginning of the year or even earlier. We will see if the recent wage data are revised up at that time.
