Special to the Austin American-Statesman
by Glenn Hegar
Dec. 30, 2022
By almost any metric, Texas’ economy is exceeding expectations and the health of the treasury is stronger than ever. Industry and people alike are drawn to our business-friendly tax and regulatory environment and robust job market, leading roughly 1,000 new people to call Texas home every day. We’ve had record-breaking job counts over the last year, adding nearly 50,000 jobs in October alone. This is even more impressive when you consider we have lived through multiple once-in-a-lifetime events in recent years, including the COVID-19 pandemic and winter storm Uri.
Texas revenues over the last 18 months have been remarkable. Only three times in the last 30 years has Texas total tax collection grown by double-digits over the previous year. Those three increases ranged from 10-13%. By comparison, last year’s increase was a whopping 25.6 percent!
Spearheading this historic year-over-year growth is the state’s revenue workhorse — sales tax. Led in large part by business spending, sales tax revenue has set new record highs month after month capped by the most recent collections which totaled $3.96 billion in November, 11.2 percent more than in November 2021. Staggering growth also came from our oil and natural gas severance taxes.
Unfortunately, inflation has played a role in this historic revenue growth. As Texans pay more for purchases, they pay more in taxes. We estimate that for many months, Texans have paid $300 million more in sales taxes per month over the past year than they would have if not for inflation. Put another way, Texans paid $4.8 billion more per month for the same taxable items than they did in the prior twelve months!
In January, I will provide the legislature with a new revenue estimate. This new estimate comes while many economists are predicting a global and national economic slowdown as inflation and interest rates continue to rise. While Texas will undoubtedly outperform the national economy, these economic forces drag on our economy.
All that to say, the upcoming revenue estimate is my most challenging yet. On one hand, our growth in the coming years will be hampered by a slowing economy, so caution is needed. On the other hand, people will be shocked when I announce that the cash carry over balance in the treasury is greater than the $27 billion originally forecasted.
We will never have a surplus of discretionary funds like this again. Honestly, the hard part will be deciding what to do with it. It’s easy when you don’t have any money — you can just say “no” to everyone. Things will be different this session, though. Texas is blessed with a remarkable, truly once-in-a-lifetime opportunity for lawmakers to make the choice to invest in infrastructure and services that will fuel growth for Texas and provide meaningful tax relief for Texans struggling with rising prices.
Texas continues to attract people and business drawn to our economic strength. And while we are not immune to the clouds on the horizon, I am certain that Texas is going to outperform the national average and head into uncertain economic times with a strong balance sheet and in good fiscal health.