Texas Motor Vehicle Fuel Tax Collections Down 83 Percent in May

In April, the Texas Comptroller’s Office announced a drastic — but unsurprising — 9.3 percent drop in sales tax revenues from April 2019. At the time, that was the sharpest drop since January 2010.

In April, the total tax collections dropped even more drastically at 22 percent from the previous year and the total net revenue was down 20 percent.

May quickly painted an even worse picture. Sales taxes collected were down almost 15 percent, total tax collections down over 50 percent, and net revenue down 49 percent. Again, this is largely based on April transactions.

Motor vehicle fuel tax collections were down 39 and 83 percent in April and May, respectively. This trickled down to the oil production tax as well, which fell 75 percent in May. Oil demand has dropped significantly as demand for ground and air travel nearly evaporated. This, especially, will affect Texas’ Rainy Day Fund as it is significantly financed by excise taxes. 

Some localities have decided to explore raising property taxes to offset the revenue losses, or even continue ahead with massive expenditures such as Austin and its $10 billion public transportation plan. To pay for it, the council proposed a 25 percent tax rate increase which voters will have to approve in November.

Tying into this development is the Senate Bill 2 “loophole,” which, depending on how things shake out, could permit cities and counties to raise property taxes up to 8 percent without triggering a referendum by voters. The 86th Legislature reduced this limit to 3.5 percent last year, but included a provision in case a disaster declaration was made.

Now, state leaders maintain this section is aimed at physical and not economic damage, which certainly was their intention behind the provision. However, the actual text does not specify its limitation to physical damage.

Some lawmakers have suggested penalties for taxing entities that raise property taxes at all, let alone above the 3.5 percent threshold. The City of Dallas already decided against considering such an increase after taking heat from taxpayers.

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