Posted on October 1, 2025
After three months of healthy growth in federal tax withholding, we estimate that growth fell in September. We estimate that federal tax withholding–the combined amount of income and payroll taxes withheld from workers’ paychecks and remitted by employers as quickly as the next day to the U.S. Treasury Department–grew by 4.2 percent in September compared to the amount from September 2024. Growth had been in the range of 6.4 percent to 6.9 percent from June to August (again, compared to year-ago amounts, see the chart below). Because federal tax withholding tends to move with overall wages and salaries in the economy, and less so with overall employment, the slowing of withholding growth in September may indicate a slowdown in the overall economy. We need to see more data to identify whether we are seeing the effects of an economic slowdown or something more like statistical noise or other temporary effects. For example, our estimate of such growth in April and May of this year temporarily dropped to the near the same range as we have now seen for September.
Government data releases will be hampered by the government shutdown that began today, to an extent that depends on the length of the shutdown. The employment report for September, which would normally be released by the Bureau of Labor Statistics on Friday of this week, may very well be delayed as the agency pauses all data releases during the shutdown and then updates its data release schedule when the government reopens. We expect that the Treasury Department’s release of the Daily Treasury Statement, which contains the daily data on tax collections that we at taxtracking.com rely on, will continue (as it did in previous shutdowns) because Treasury’s debt management and the interactions with the financial system are considered essential operations.
