Taxes & SpendingSales Tax Revenues Still Behind 2019 Pace, October Total Down 3.5% from Previous Year

Texas' oil and gas industry continues to limp through the pandemic, further illustrated by the depreciated production taxes remitted to the state.
November 2, 2020
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October sales tax revenue totaled $2.7 billion — an improved pace from the previous month but still down 3.5 percent from October 2019. Through the first two months of this fiscal year, sales tax revenues are down 4.8 percent.

Total tax collections were down nearly 10 percent from the same month last year.

Comptroller Glenn Hegar said in the release, “October sales tax collections from all major economic sectors declined significantly from year-ago levels, with the exception of collections from retail trade.”

“The steepest declines were in receipts from oil- and gas-related sectors, with the rate of well drilling activity depressed almost 75 percent from the previous year,” he added.

Oil and gas production has recovered some from the springtime brake check caused by the pandemic and global supply tiff, but it’s still behind the eight-ball.

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Production tax revenues for October are down 42 and 33 percent for oil and gas, respectively. Those two taxes account for a substantial portion of the state’s “Rainy Day Fund.”

Hotel occupancy taxes are still behind over 30 percent last year’s levels — something which many localities lean on to bring in general revenues. Both in oil production and hotel occupancy tax collections, it is clear travel volumes remain depreciated due to the pandemic.

The one portion that didn’t decline was insurance taxes which are 10 percent above the previous year’s levels.

Hegar added, “Receipts from restaurants also remain down from a year ago, though significantly higher than in the spring, with some resumption of dine-in service after relaxation of capacity limits as well as increased sales of meals for pickup or delivery.”

Due to state and local orders, consumer spending is depreciated especially within the food and hospitality sector — and most of these businesses are only allowed to operate at some degree of restricted capacity.

Despite all this, and primarily due to vastly higher federal funding inflow, the state’s total net revenue is six percent higher than the same month last year.

The trend has been building for some time and caused Hegar to adjust his biennium revenue projection, estimating a $4.6 billion budget shortfall.

Moving forward, sales taxes account for the largest single source of tax revenues and until the restrictions are removed coronavirus concerns dissipate, it will continue to lag behind 2019-levels.

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Brad Johnson

Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.

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