Texas Is Doing Sales Tax Right

Texas Is Doing Sales Tax Right

The State of Texas is trending strong with robust sales tax collections being reported from one city after another.  This, in spite of the fact that some of these cities suffered a hit from Hurricane Harvey.  Take a look at these numbers:

• Harlingen retail sales are up more than 8% from this time last year.
• Brownsville reported a nearly 7% gain over August sales tax collections.
• South Padre Island, although tumbling immediately after Hurricane Harvey, overall, the island municipality is up nearly 6% compared to last year's averages.
• Raymondville increased 2017 revenues a whopping 74% compared to 2016.

The Bigger Picture: The Texas Comptroller's office reported in August that state sales collections for the month of July saw a nearly 8% increase over June's revenues. Texas sales tax revenues for July totaled more than $2.5 billion.  And more than half of July's sales tax revenue was generated by the oil and gas industry.  The heart of which, lies in Houston.

Even with Houston being hit hard by Hurricane Harvey, bringing oil and gas production to a virtual standstill in the city temporarily, state sales tax collection barely saw a hiccup. September totals dipped to $2.36 billion.  However, even with that dip, this year's September total was still nearly 11% greater than September of last year.

Getting It Right: What can other states learn from healthy Texas sales tax collections even during a time of trouble for some municipalities?  After all, Texas state sales taxes are generally the highest in the country.  The lesson to learn might be in Texas' tax trade-off philosophy.  Many states with lower sales tax rates rely more on state income tax.  By trading a higher sales tax rate for no state income tax, Texas seems to have a winning strategy.  The proof that Texas is getting its sales tax policies right is in the numbers.  Even in the midst of an historic natural disaster, Texas is still stronger than it was this time last year without such a disruption.