HB 77 proposes a major restructuring of Texas tax and school finance law centered on replacing certain sales, use, and school property tax mechanisms with value added taxes. The bill creates a state value added tax beginning January 1, 2030, at a rate of 6.72 percent on taxable receipts from services and property supplied in the ordinary course of business, with input-tax credits and a set of exemptions and exclusions. It also authorizes local political subdivisions that previously imposed sales and use taxes to instead impose local value added taxes, subject to a combined local cap of 2 percent, and allows school districts to adopt a separate school district enrichment value added tax of up to 0.5 percent if approved by voters.
The bill would prohibit school districts from imposing maintenance and operations ad valorem taxes beginning January 1, 2030, but only if a related constitutional amendment is approved by voters. In place of that local property-tax system, the bill requires the legislature to fund the Foundation School Program at a level sufficient to meet constitutional obligations and sets a minimum basic allotment of at least $6,160 per student beginning with the 2030-2031 school year. It also directs the commissioner of education and the comptroller to manage a transition from property-tax-based school finance to state funding and enrichment value added taxes, including reporting, classification of bonds, and recommendations for restructuring outstanding debt.
HB 77 would substantially amend Texas tax law by repealing large portions of the Tax Code and Education Code, including chapters and subtitles tied to existing sales, use, and school finance tax structures. It would eliminate local sales and use taxes, replace them with local value added taxes, and repeal provisions related to school district maintenance taxes and Chapter 49 school finance equalization provisions if the school property tax prohibition takes effect. The bill also requires the comptroller to adopt rules, administer the new tax system, and deposit state value added tax proceeds into general revenue.
Because no committee transcripts or votes are provided, the available record does not show formal debate or recorded support/opposition. Based on the bill text alone, the measure appears highly consequential and likely to draw both support from those favoring a broad tax-system overhaul and opposition from those concerned about replacing familiar local tax tools, the complexity of implementation, and the effects on school funding and local control. The bill is structured with multiple contingent effective dates, indicating that its school-finance changes depend on voter approval of a constitutional amendment and on later implementation steps.
The main points of contention likely concern the elimination of school district maintenance and operations property taxes, the shift to a statewide value added tax, the treatment of local taxing authority, and whether the proposed state funding levels would adequately replace existing revenue. Additional issues include how exemptions would be administered, how business-to-business and other excluded transactions would be defined, and how outstanding school debt tied to current tax revenues would be handled during the transition.
HB 77 would overhaul the Tax Code and Education Code by replacing major portions of the existing sales/use and school property tax framework with a state and local value added tax system. It would repeal numerous Tax Code subtitles and school finance provisions, prohibit local sales and use taxes, authorize local value added taxes in their place, and conditionally eliminate school district maintenance and operations ad valorem taxes while creating a new school enrichment tax option and new state funding obligations for public education.
No committee discussion or vote history is provided, so there is no recorded legislative sentiment in the supplied materials. From the bill text, the proposal appears ambitious and transformative, suggesting it would likely generate strong interest from supporters of tax reform and school finance restructuring as well as skepticism from those wary of replacing existing local tax systems and property-tax funding structures.
The most likely areas of contention are the repeal of school district maintenance and operations property taxes, the replacement of local sales taxes with local value added taxes, and the extent to which the state would be required to backfill school funding. Other disputed issues likely include the 6.72 percent state VAT rate, the 2 percent local cap, the 0.5 percent school enrichment tax, the scope of exemptions and exclusions, and the practical handling of existing school debt and bond obligations during the transition.