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Forecast office flags payroll-expense tax volatility, wide uncertainty around social housing tax estimate
Summary
Forecast staff told the council payroll-expense tax collections are highly sensitive to equity prices and restricted stock compensation, producing large swings across scenarios; the office also reported a preliminary social housing tax estimate with a wide range and substantial data limitations.
Forecast Office staff told the Forecast Council on Aug. 4 that payroll-expense tax collections are unusually volatile this cycle because a large share of compensation at major taxpayers is delivered as restricted stock units (RSUs) and other equity-linked pay. Staff said payroll-expense tax forecasts depend heavily on expected stock prices and analysts' outlooks for large companies.
Director Duras said the office uses an average of commercial US forecasts (S&P Global and Moody’s Analytics) as inputs to limit single-source optimism. Under the pessimistic scenario, staff said payroll-expense tax collections could be nearly $40 million lower over the two-year window than under baseline assumptions, driven by equity price declines and weaker compensation realizations.
Forecast staff also presented a preliminary estimate for the proposed social housing payroll tax for the 2025 tax year (taxes due Jan. 2026). The office estimated $65.8 million as a midpoint and presented a plausible range of roughly $39.2 million to $80.0 million, describing the number as subject to substantial uncertainty. Staff explained the uncertainty arises because the administrative payroll data from the Employment Security Department (ESD) are reported at employer sites and do not map cleanly to the city tax base; some firms report payroll at a single headquarters location that does not reflect worker location for tax liability.
Council members asked for further breakdowns and for the Forecast Office to refine estimates as additional data become available and as tax implementation rules are clarified.
