Texas Sales Tax Revenue Grows 2.7% in July, Indicating Potential Economic Slowdown
The Texas Comptroller recently announced that state sales tax revenue in July 2023 reached $3.99 billion, reflecting a 2.7% increase compared to July 2022. However, this growth rate suggests a potential slowdown in the state’s economic growth.
Comptroller Glenn Hegar stated that the moderation in sales tax revenue aligns with the slowdown in economic growth and declining price inflation. He also highlighted that sectors driven by business spending, such as manufacturing and wholesale trade, experienced significant declines compared to the previous year. Additionally, receipts from oil and gas mining grew at the slowest pace since May 2021, when the sector began recovering from the pandemic.
The retail trade sector, overall, saw a slight decrease in receipts compared to the previous year. However, within the retail subsectors, electronic shopping experienced robust growth as online sales continue to gain market share from physical stores. On the other hand, home improvement centers, furniture and home goods stores, and sporting goods and hobby stores witnessed significant drops in receipts.
Although restaurant receipts increased slightly, they did so at a slower pace than the inflation rate for food away from home in June.
Despite these mixed results, total sales tax revenue for the three months ending in July 2023 rose by 4.5% compared to the same period last year. It is important to note that sales tax is the largest contributor to state funding, accounting for 56% of all tax collections.
Apart from sales tax revenue, Texas also collected revenue from other major taxes. Motor vehicle sales and rental taxes increased by 3% from July 2022, while motor fuel taxes saw a 2% increase during the same period. However, the oil production tax experienced a significant decline of 37%, and the natural gas production tax plummeted by 88% compared to July 2022. The hotel occupancy tax also decreased by 3%, while alcoholic beverage taxes saw a minor increase of less than 1%.
These findings reflect a nuanced economic landscape in Texas, with certain sectors experiencing growth while others face challenges. The state’s economy may be entering a period of slowdown, necessitating close monitoring and potential adjustments to fiscal plans. It is crucial for policymakers to consider these developments and adopt appropriate strategies to sustain economic stability and growth.
For more detailed information on monthly revenue collections, readers can visit the Comptroller’s Monthly State Revenue Watch. Additionally, an extensive history of tax policy developments and fees from 1972 to 2022 can be found in the updated Sources of Revenue publication.
