COVID increases TX Sales Tax Revenue by $14B

Summarize COVID Impacts

The cumulative impact of COVID-19 on Texas Sales Tax Revenue is an additional $14 Billion. The Texas business community should be recognized for contributing to the state’s economic recovery. This gain in tax receipts was largely driven by Texas migration, increasing the number of businesses and consumers, resulting in added demand for goods and services. Secondarily, inflation increased prices and thus total tax revenue. “Pent-up demand” may have been a factor in the initial recovery but would be insufficient to explain the above-trend spending.

COVID impacts of Texas Sales Tax Revenue

How COVID Impact was Calculated

Using Texas sales tax revenue from January 2007 through December 2019, we used an ARIMA model to forecast the next five years, 2020 – 2024. This time-series model captures the historical data's trend and seasonality and gives us a scenario for the revenue without COVID-19 (see footnote for details). Using a similar modeling technique, the actual tax revenue data was extended to the end of 2024 to make a five-year comparison for 2020 through 2024.

COVID Impact = Actual Tax Revenue – Pre-COVID forecast

Texas Open for Business

Texas reopened its economy and lifted most COVID-19 restrictions on March 10, 2021. By the next month, April 2021, the COVID-19 impact (see graph) went from negative to positive. In contrast, California did not fully reopen its economy until June 15, 2021, giving Texas a three-month head start. This lead position and an arguably favorable regulatory and commercial environment motivated many companies and workers to relocate to Texas.

Texas Total Sales Tax (Texas Open Data Portal)
Pre-COVID Forecast based on best fit Auto-Regressive Integrated Moving Average (ARIMA) Model
Aug-Dec 2024 Forecast based on best fit Auto-Regressive Integrated Moving Average (ARIMA)