Posted on July 1, 2026
We observed in June a downward movement in growth of federal tax withholding–which is the economywide amount of income and payroll taxes that employers withhold from workers’ paychecks and remit to the Treasury Department as soon as the day after the workers are paid. Specifically, we estimate that tax withholding grew by only 2.8 percent in June compared to the amounts from June 2025, thus increasing less than the overall rate of inflation. That growth in withholding is substantially less than the average of 5.3 percent from January to May (again, compared to the same months a year ago). However, we have less confidence in our measurement of withholding growth for June than usual for a month because there was more variability than normal in our day-by-day measurement of withholding growth. (Yes, we have daily growth measures available on the taxtracking.com website.) The variability may be from the Juneteenth holiday occurring at the beginning of the representative periods we use for measuring monthly withholding growth (see our methodology), although other months have holidays that sometimes occur right around the same time: Martin Luther King’s Birthday and President’s Day (which are Monday-only holidays unlike Juneteenth).
The employment report for June is scheduled to be released tomorrow by the Bureau of Labor Statistics, a day earlier than the typical first or occasionally second Friday of the month because of the July 4th holiday. We shall see if the report has a slowdown in job growth as with the withholding data, although the two measures do not move in lockstep for a number of reasons: the employment data get revised; they are based on a large sample of employers, while the withholding data cover all employees; withholding includes not just job growth effects but also changes in income per worker; and withholding can change for reasons unrelated to overall income growth, such as from tax law changes (which we attempt to adjust for when estimating withholding growth) and income growing faster or slower for taxpayers in different tax brackets.
