Texas is raking in a record-high amount in tax revenue, thanks in part to economic growth and surging inflation pushing the cost of everyday goods higher.
The Lone Star State collected $77.2 billion in taxes in the fiscal year through August, up 25.6% from the previous fiscal year, according to a release from state Comptroller Glenn Hegar.
Sales tax revenue, meanwhile, totaled about $43 million, about a 19.3% increase from fiscal year 2021.
“Over the last many months, economic growth and inflation have driven higher sales tax collections as demand remains strong and businesses and consumers continue to pay elevated prices for goods,” Hegar said in the release.
The increase in tax revenue has only been in the double digits five times since 1988, according to Hegar, and even then the jump only ranged from 10% to 13%.
Texas does not have a state income tax or a corporate income tax, meaning that it depends heavily on its sales tax to generate revenue. Sales tax revenue tends to increase during periods of high inflation, because the price of everyday consumer goods like food, gasoline and clothing is also more expensive.
“The strong growth in August came from receipts remitted by the oil and gas mining sector, which were up by nearly 80% compared with a year ago,” Hegar said.
“Receipts from the construction, manufacturing and wholesale trade sectors showed double-digit growth for the ninth consecutive month, demonstrating continued strong spending by businesses in the state.”
Inflation has ripped higher over the past 12 months, regularly hitting new records each month. Although the torrid pace of inflation cooled slightly in July, the consumer price index remained at 8.5%, near the highest level in four decades.
State tax revenues have seen large swings since the onset of the COVID-19 pandemic, and though many local governments forecasted steep revenue shortfalls for fiscal years 2021 and 2022, those have yet to materialize.
State and local government tax revenue from major sources, including personal income, corporate income, sales and property taxes, actually increased 14.3% in nominal terms and 7% when adjusted for inflation in the first quarter of 2022, compared to the first quarter of 2021, according to new data published by the Urban Brookings Tax Policy Center.
Still, the nonpartisan think tank noted that while the short-term outlook for state budgets remains positive, growth could be limited in the upcoming fiscal years and “may require budget reversals.”
“State revenues will be affected by the current geopolitical crises, continued uncertainties related to the ongoing pandemic, high inflation and evolving federal monetary policy,” the report said. “Further, revenue growth will also be limited or reversed when tax cuts enacted during fiscal year 2022 and 2023 are fully implemented.”