The US Daily Treasury Statement is one of our favorite data resources, but we’ve had to put it on the shelf for the last 18 months. The DTS is essentially the nation’s checkbook, tracking inflows (mostly personal/corporate taxes and debt issuance) and outflows (the myriad of places where the US government spends its $3.5 trillion annual budget).
Just to give you a sense of the data, here are a few 2019 fiscal YTD numbers (October 2018 as a starting point):
- $2,456 billion in tax and withholding receipts paid to the Federal government by individuals and companies year-to-date.
- $510 billion in incremental Treasury debt issuance to the public and Social Security Trust Funds from October 2018 to now.
- $2,996 billion in spending, with these being the largest parts YTD: Social Security ($632 billion), Medicare ($547 billion), Medicaid ($269 billion) and Defense vendor payments ($231 billion).
You can see where this wealth of data, delivered in virtually real time, would be useful. But a large part of its utility – tax receipt data – was skewed by changes to the tax code in 2018. So last year we put the Daily Treasury Statement away and waited.
Now that we have 5 months of 2019 DTS data and some clean comps to last year we can dust it off and start applying it to important macroeconomic questions. We’ll cover 2 today:
#1: The state of the US labor force viewed through the lens of payroll tax/withholding and non-withheld tax receipts. The idea here is straightforward: most working Americans see their taxes/withholding deducted from their regular paychecks. This money shows up in the DTS a few days after, so growth in tax/withholding receipts is a proxy for aggregate wage growth (a combination of the number of workers and what they are paid).
Here’s how things look right now as compared to last year:
- May payroll taxes/withholding payments were 8.8% higher than last year.
- This is in line with April’s 9.3% comp and stronger than March (3.6%) or February (4.5%). January’s data is skewed by one-off effects from the tax law changes last year and is not directly comparable.
Bottom line: whatever news tomorrow morning’s payroll report brings, the underlying state of the US labor force looks reasonably strong, especially this late in an economic cycle. An almost 9% increase in tax/withholding means there is some combination of more people working and rising aggregate wages. The DTS doesn’t tell us “average” wages, so the lion’s share of the increase may well be going to the top of the income distribution. But it does at least say total wages are on an upswing.
The same is not true, however, for self-employed workers who pay estimated taxes. These include everyone from Uber drivers to real estate agents, and Treasury receipts here are down 47% in May 2019 versus last year.
#2: The lingering effect of last year’s changes to personal tax rates among higher-income Americans. A few weeks ago we showed that the recent tax refund season showed no meaningful change to prior years despite worries to the contrary. We did, however, wonder if higher income households would end up owing more in Federal taxes because of the reduced deductibility of state and local taxes.
April’s non-withheld tax receipts show that, in aggregate, higher income taxpayers (who usually have to write a check in April) fared no worse in 2019 than 2018:
- This April, the US government received $206.5 billion in non-withheld individual tax payments. April is also when self-employed individuals pay quarterly taxes, but the vast majority of this month’s receipts come from final true-up payments with the annual April 15th tax deadline.
- This is actually 1.3% lower than April 2018, which saw $209.2 billion in non-withheld individual tax payments.
Bottom line: for all the worry that Americans would face unexpected tax payments from the pretty radical remake of the personal tax code in 2018, this year ended up looking pretty much the same as last year. April’s taxpayer checks to the IRS were, on average, the same as 2018 and refunds were similar as well.
Final takeaway: as much as tax receipt data is rear-view mirror material, the DTS data is at least very, very recent history. Unlike other economic data of late, it shows none of the sudden weakness that has pushed Q2 GDP estimates lower and spooked equity markets. A whole raft of issues could mean 8-9% tax/withholding growth is unsustainable, ranging from stagnant corporate margins to US-China trade war uncertainty. But at least we’re starting from a high base.
Daily Treasury Statement: https://www.fms.treas.gov/dts