Texas sales tax revenues in May jumped to an all-time monthly record, signaling to critics of this year’s state budget deal that lawmakers could have done more in the way of tax relief.
The state sales tax revenues last month totaled $3.01 billion, a 9 percent increase over sales tax collections in May 2018, according to Texas Comptroller Glenn Hegar.
“State sales tax revenue growth was propelled by both business and consumer spending,” Hegar said in a prepared statement. “The strongest growth was in remittances from the manufacturing, wholesale trade and services sectors, with strength apparent in the retail trade sector as well.”
The Texas Public Policy Foundation recently criticized state lawmakers for producing a 2020-21 budget that increases appropriations 12.5 percent over the 2018-19 budget and produced little in the way of immediate property tax relief for homeowners. Instead, the budget plan restricts the growth of property tax revenues in future years.
The sales tax provides the largest share of revenues for state budgets, according to Hegar’s office. It represents 57 percent of tax levies in Texas, which doesn’t have a state income tax.
Talmadge Heflin, director of the foundation’s Center for Fiscal Policy, said a portion of revenue growth should always be returned to taxpayers through tax cuts. The legislature should have done more to provide property tax relief, Heflin said.
“We believe they should have been more aggressive in that area,” he told The Center Square.
Heflin also pointed to other indications of state’s economic health, including a 28 percent year-over-year increase in natural gas production taxes and a 16 percent boost in oil production taxes. The franchise tax on businesses, meanwhile, brought in $3.47 billion last month, a 7.4 increase over what it was in May 2018, according to the Comptroller’s Officer.
The sales tax revenues are a good indication of near-term economic health in the state, according to Heflin.
“Companies pay roughly half of the sales tax,” he said. “That’s an indication they’re doing well.”
The position of sales tax critics that the tax is regressive and often volatile is off base, Heflin said.
“The sales tax is the least burdensome because people have the option of buying or not buying,” he said. “...That’s the one tax that people have more control of than others.”