Texas economy

‘Booming’ Texas economy sets monthly high in sales tax collections for third straight month

AUSTIN (Reuters) – Texas imposed more sales taxes than ever before in December, setting a new monthly record for the third month in a row as businesses and consumers sent in “rising” receipts from all major sectors of the state’s economy, Comptroller Glenn Hegar said Monday.

Retail spending grew most strongly in electronics, appliance and clothing stores, which were hammered in 2020 by the COVID-19 pandemic, Hegar said in a written statement.

“But double-digit growth continued in revenue at home improvement and furniture stores, sporting and leisure goods stores and online general merchants, segments boosted a year ago by habits of pandemic spending,” he said.

“Restaurant revenue, another depressed sector a year ago, has also risen sharply and well above pre-pandemic levels.”

Before the pandemic, Texas had just four months in which sales tax collections, its revenue workhorse, reached or exceeded $3 billion for the month. But for nine consecutive months, from April through December, the state’s sales tax generated more than $3 billion – including nearly $3.56 billion, which are record amounts, during each of the last two months of 2021.

Texas sales tax accounts for 59% of all state tax revenue. The state rate is 6.25%, and cities, counties, special purpose districts, and transit authorities can levy up to an additional 2%, for a maximum combined rate of 8.25 %.

The majority of December remittances to Hegar’s agency are based on sales made in November.

“With Christmas shopping kicked off by the early start of the holiday promotional pricing weeks ahead of Black Friday, and despite supply chain lockdowns and household budgets under pressure from rising food prices and from gasoline, consumer spending drove a double-digit increase in retail revenue,” he said.

Hegar, a Republican who is the state’s top tax collector and revenue estimator, likes to look at three-month averages of tax receipts.

If you compare with the previous year, when economic activity was suppressed by the coronavirus outbreak, sales tax rebates from October to December soared nearly 23%, he noted. .

But even compared to the pre-pandemic slump of 2019, when Texas was booming, revenue in the past three months has jumped nearly 17%, said Hegar, who concluded that the state is seeing “growth exceptional”.

Eva DeLuna Castro, budget analyst at the progressive Every Texan group, welcomed the comptroller’s report, although she said it confirmed suspicions that he had been “very conservative” in his revenue projections.

Under a 1940s amendment to the Texas Constitution, Hegar’s two-year revenue estimate, released at the start of each regular session of the legislature, sets a cap on how much lawmakers can spend.

Omicron is not a factor – yet

“If things continue as they are in the first four months of fiscal 2022, we’ll end up with a few billion more in just sales tax” than the $38.6 billion in consumption tax that Hegar has planned. are going into the public treasury, DeLuna Castro said.

“Again, this is only for one year of the two-year budget,” and the report found no downturn caused by the new omicron variant of COVID, she said.

Overall, though, “it’s good news,” she said.

Hegar made its latest projections in a “certification revenue estimate” in early November. In it, it projected that over the two-year cycle ending in August 2023, $135.3 billion of state general purpose revenue would go to the Treasury.

Hegar said there should be enough state discretionary income to leave $24.6 billion unspent, either in the general fund or in a “rainy day fund” that lawmakers and legislators Texas voters created after the oil and housing crisis of the 1980s.

The original idea was to provide a reserve that could be tapped during economic downturns to mitigate the severity of spending cuts. But over the past decade, GOP state leaders have been reluctant to dip into the Economic Stabilization Fund, which Hegar said should have an end-of-cycle balance of $12.6 billion.

On the eve of a special legislative session, Texas Comptroller Glenn Hegar on Wednesday...