Houston relies on sales tax for 25% of its income.
Tariffs creating uncertainty in Texas as report shows slower revenue growth since late 2024
Texas local businesses reported slower revenue growth since late last year, sparking uncertainty over President Donald Trump’s policies on tariffs and concerns of a possible recession, according to a report released by the Federal Reserve Bank of Dallas on Thursday.
As the nation’s leading trade state, Texas has been significantly impacted by the higher tariffs on imports from Mexico, Canada, and China imposed earlier this year by Trump’s administration.
“The uncertainty index for both manufacturers and service sector companies jumped in March to levels not seen since late 2022, during the height of the pandemic,” the Dallas Fed Texas Business Outlook Surveys (TBOS) report stated.
Nearly half of Texas businesses surveyed expressed concerns that rising costs could reduce consumer demand and push the state into a recession. Among those hit hardest are manufacturers, many of whom reported difficulties maintaining production levels. The Texas service-sector was also affected: its revenue growth has been declining since late 2024, reaching zero by March, according to TBOS respondents.
The Trade Partnership Worldwide, an international research firm, estimates that the tariffs could cost Texas businesses $47 billion and cut the state’s gross domestic product (GDP) growth by 1.5 percentage points. Researchers predict that this decline in economic growth could lead to the loss of approximately 100,000 jobs.
Tony Payan, the executive director of the Center for the U.S. and Mexico at Rice University’s Baker Institute for Public Policy, said that tariffs are “going to hit Texans very hard.”
“We have to remember that 40% to 50%, depending on the season, of our agricultural produce comes from Mexico,” said Payan. “Tariffs on cucumbers or strawberries or avocados, other Mexican fruits and vegetables, they have no easy and quickly available import substitution opportunity. So inflation is going to be very hard to control.”
Payan added that “the Texas government and congressional delegation should have been a lot more assertive in pushing back against the White House and President Trump.”
The chart below indicates how the City of Houston generates revenue. Sales taxes comprise over 25% of the revenue.
Houston is in the red, and every report indicates that Mayor Whitmire’s debt hole keeps getting deeper. From ABC 13;
According to City Controller Chris Hollins and City Finance Director Melissa Dubowski, Houston is currently spending north of $200 million more than it is bringing in.
A recent judgment in a years-long legal battle over the city’s mismanagement of drainage and street funding just ballooned the deficit from $300 million to $350 million.
Houston Mayor John Whitmire said he met with the men behind the lawsuit earlier this week. He affirms the city’s commitment to allocating the necessary funds to streets and drainage but attempts to push out the timeline for doing so.
Negotiations between the Houston Police Officers Union and the city kicked off last week. The department is asking for raises in addition to more than $100 million in staffing increases.
“Public safety is my highest priority,” Whitmire told ABC13. “We’re going to manage to give them the benefits package that not only will recruit officers but retain officers.”
At this time, it remains unclear how the city will pay for the benefits package.