State Sales Taxes Drop, Ending 62-Month Growth Streak

Posted by Aman Batheja - Texas Tribune on
Photo by Steven Depolo

Texas collected less state sales tax revenue in June than it did in the same month a year earlier, ending a remarkable 62-month streak of growth, Comptroller Glenn Hegar said Wednesday.

The state collected $2.2 billion in state sales taxes in June, down 1.4 percent compared with June 2014. The figure reflects monthly sales made in May by businesses that report taxes monthly.

"This slight decline was expected due to the slowdown in the oil and gas mining sector, and is in line with the biennial revenue estimate presented in January," Hegar said in a statement.

Texas rig counts recently concluded a six-month nosedive as the industry has reeled from dropping oil prices. As of last Thursday, there were 363 oil and gas rigs across the state, down from 900 rigs back in November, according to Baker Hughes, which publishes weekly industry data. 

The end of the state’s sales tax streak follows a loss of 25,400 jobs in March, ending a streak of 53 months of growth, according to state and federal data. Yet Texas turned around and added 33,200 jobs in May. 

Spending on drilling equipment has long served as a boon to sales tax coffers, so the recent drop in sales tax collection isn't surprising, said John Kennedy, a senior analyst with the business-backed Texas Taxpayers and Research Association. Yet the recent rebound in job growth suggests oil and gas won’t be too much of a drag on the state's broader economy. He predicted that sales tax revenue growth would be close to flat in the coming months.

“If Austin and Dallas are any indication, we’re not seeing any dramatic slowdown in construction,” Kennedy said. “I do not see from the other economic indicators any significant slowdown ahead.” 

In a video released Wednesday, the Federal Reserve Bank of Dallas forecast the state's job growth for the year at around 1 percent, or about 120,000 jobs. Research director Mine Yücel said job losses in the oil and gas industry were largely being offset by gains in the service sector, particularly in the leisure and hospitality field.

"Texas may not outpace the nation in 2015, but even if we don't, we will have positive job growth," Yücel said in the video.

Jim Malewitz contributed to this report.

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