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Wednesday, November 30, 2022
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Texas Taxpayers Pay a Record High for 2022

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Person pushing shopping cart with groceries. | Image by Shutterstock

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Texas has collected record-high tax dollars this year as inflation drives up the price of goods and services across the nation.

Texas’ tax collections from the start of the year through August totaled $77.21 billion, up 25.6% from the 2021 fiscal year, according to Texas Comptroller Glenn Hegar.

Historically, sales tax dollars increase during periods of high inflation since more expensive consumer goods yield more money for the State.

“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 a September press release.

“To put it into perspective, only five times since 1988 has the rate of growth in Texas’ All Funds tax collections exceeded the prior fiscal year by double digits — and those increases ranged from 10 to 13 percent,” Hegar said, adding tax collections continue to outpace his office’s forecast.

Texas is one of several states that does not require its residents to pay an individual income tax. The Lone Star State instead relies heavily on sales taxes, which make up more than half of its spending capacity.

Data for the first quarter of 2022 show that taxes in Texas had a normative increase of 14.3% and a 7% inflation-adjusted increase, according to the Urban Brookings Tax Policy Center (UBTPC), a non-partisan Washington D.C-based think tank.

Texas collected $42.97 billion in sales taxes in August, about a 19.3% increase from the fiscal year 2021, according to the comptroller’s office.

Taxes on oil and natural gas production rose $6.36 billion, up 84.4% from fiscal 2021, and $4.47 billion, an increase of 185% from last year. The Economic Stabilization Fund (ESF) and State Highway Fund (SHF) receive funding from oil and natural gas severance taxes.

“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.”

While the short-term outlook for the state budget remains promising, slowing economic growth and geopolitical conflicts overseas may create a situation that requires budget reversals, noted the UBTPC.

“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.”

Key Take-Aways

  • All Funds tax collections totaled $77.21 billion, up 25.6% from fiscal 2021.
  • Sales tax collections totaled $42.97 billion, up 19.3% from fiscal 2021.
  • Motor vehicle sales and rental tax collections totaled $6.45 billion, up 12.5% from fiscal 2021.
  • Franchise tax collections totaled $5.67 billion, up 25.2% from fiscal 2021.
  • Oil production tax collections totaled $6.36 billion, up 84.4% from fiscal 2021.
  • Natural gas production tax collections totaled $4.47 billion, up 185% from fiscal 2021.

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