Sales Tax: A Revenue Bright Spot on this Gloomy Day
The Texas Comptroller recently reported that state sales tax revenue totaled $2.56 billion in July, 7.9 percent more than in July 2016.
“Sales tax receipts from all major economic sectors were up compared to last year,” Hegar said. “The most notable increases were from oil- and gas-related industries, as spending on well development continues to rebound. Despite the recent uptick, sales tax revenue remains in line with recent estimates…”
Total sales tax revenue for the three months ending in May 2017 was up 3.2 percent compared to the same period a year ago. Total sales tax revenue for the three months ending in July 2017 is up 7.3 percent compared to the same period a year ago. This positive change indicates an increasing growth trend that is desperately needed by the state to address the significant shortfall in Medicaid (in excess of $7 billion all funds) appropriated by the Legislature.
The state’s tax system is the main source of General Revenue-related funding for the state budget. Within this tax system, sales tax revenue is the largest source of state funding for the state budget, accounting for 56 percent of all tax collections. Motor vehicle sales and rental taxes, motor fuel taxes and oil and natural gas production taxes are large revenue sources for the state. If there is a down side it would be that this good total news is tempered by the fact that one major source, motor vehicle sales and rental taxes, is down 7.3%.
In July 2017, Texas collected the following revenue from the major tax sources taxes:
- motor vehicle sales and rental taxes — $384.7 million, down 7.3 percent from July 2016;
- motor fuel taxes — $308.2 million, up 3.7 percent from July 2016; and
- oil and natural gas production taxes — $251.5 million, up 24.6 percent from July 2016.
In the Comptroller’s Biennial Revenue Estimate, tax collections in 2018-19 were projected to generate an estimated $92 .67 billion and non-tax revenues an additional $13 .80 billion. This estimate assumed an estimated $1 .53 billion ending balance carried forward from 2016-17. This carry forward is now, most likely significantly reduced by recent Legislative action through HB2, the Supplemental Appropriations Bill.
With the amount estimated for 2018/19 being down from previous years, and the carry forward balance being reduced, the trend upward in revenue from sales tax is indeed good news. Will it last or continue to strengthen? Texas Insight will keep you posted.