Texas Continues To Face Economic Downturn

But Texans continue to spend, keeping sales tax revenue more steady.

By Terri LangfordDecember 1, 2020 1:41 pm,

Sales tax revenue, which makes up 60% of all tax receipts in Texas, is the bright spot in the pandemic economy for the state right now. 

Make no mistake: Texas, like the rest of the nation, is seeing a downtown in revenue. To combat that, Texas Comptroller Glenn Hegar has put state agencies on notice to start cutting spending. 

“Since the beginning of March, and lower oil prices, we’ve continued to see double digit decreases in revenues and severance tax collections compared to the same time a year ago as well,” Hegar said. “Hotel, leisure, hospitality. Those areas continue to be significantly [down].”

But thanks to more people spending money on home repairs, work from home supplies and workout equipment, the shortfall was not as dire. Also federal economic stimulus checks to individual taxpayers and businesses, helped spending. Sales tax revenue shot up in July compared to the same period a year ago. 

“Those combined, plus people were spending an inordinate amount of money in and around their home,” Hegar said. “People who were teleworking were either buying workout equipment or were buying computer equipment.” 

With vacations canceled, many consumers merely redirected their vacation money to home improvement projects. 

Another big boost? A measure passed two years ago by the Texas Legislature that now captures sales tax from out-of-state retailers like Amazon, also helped Texas from taking a bigger state budget hit. 

“I’d asked them last session to make an equal playing field. So those brick and mortar stores that are charging sales tax, those online have to collect it, too,” Hegar said. “The state is now collecting those online sales tax collections and we originally thought it’d be about half a billion in a given year. And in actually the last 12 months, it was almost $1.3 billion.”

Hegar is scheduled to deliver his latest economic update to the Texas Legislature on Jan. 11.

“I’ve got a little less than a month to give them an exact number. And we’re working on those finishing touches right now,” he said.

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