HB 98 would substantially restructure Texas tax and school finance law by replacing the existing sales-and-use tax framework with a state and local value added tax (VAT) system. The bill imposes a 6.72% state VAT on taxable business-to-business and consumer supplies of services or property, with input-tax credits, exemptions for small businesses and certain public-interest entities, and exclusions for items already taxed elsewhere or barred by law. It also authorizes local governments that currently levy sales taxes to instead impose local VATs, capped at a combined 2% rate, and directs the comptroller to administer, collect, and distribute the tax revenue to the state general revenue fund and local jurisdictions.
The bill also creates a school district enrichment VAT of up to 0.5%, subject to voter approval, to fund enrichment facilities, activities, and related debt. At the same time, it would prohibit school districts from imposing maintenance and operations ad valorem property taxes beginning January 1, 2030, but only if voters approve a related constitutional amendment. 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 $6,160 per student beginning with the 2030-2031 school year, while directing state assistance for the transition away from property-tax-based school finance.
HB 98 would make major changes to the Tax Code and Education Code, including repealing several tax and school finance provisions and eliminating existing school district maintenance-and-operations tax authority if the constitutional condition is met. It would also require extensive rulemaking by the comptroller, transition reporting by school districts, and recommendations on how to refinance or reclassify outstanding school bonds tied to current property tax revenue. The bill’s structure suggests a phased implementation, with some provisions taking effect in 2025 or 2026 and the core tax and school finance changes taking effect in 2030 if the required constitutional amendment is approved.
The overall sentiment reflected in the available record is neutral to indeterminate, because there are no committee transcripts, recorded votes, or other discussion snippets provided. Based on the bill text alone, the measure appears ambitious and comprehensive, aiming to replace property-tax-heavy school finance with a VAT-based system and to broaden the state and local tax base. Its scale and conditional implementation likely make it a significant policy proposal, but the available materials do not show direct support or opposition from legislators or stakeholders.
The main points of contention inherent in the bill are the elimination of school district maintenance-and-operations property taxes, the shift to a VAT on services and property, and the requirement that voters approve a constitutional amendment before the school-tax changes take effect. Potentially affected parties include consumers, businesses, local governments, school districts, taxpayers, and the comptroller’s office, with particular sensitivity around school funding, local taxing authority, and the treatment of existing debt obligations.
HB 98 would overhaul Texas tax law by repealing major portions of the Tax Code and replacing sales-and-use taxation with a state and local value added tax regime. It would also significantly amend school finance law by conditioning the end of school district maintenance-and-operations property taxes on voter approval of a constitutional amendment, creating a new school district enrichment VAT, and requiring the state to assume a larger role in funding the Foundation School Program and managing the transition from property-tax-based school finance.
No committee testimony or vote record is available, so the bill’s sentiment cannot be measured from legislative debate. The text indicates a sweeping reform proposal with a strong policy direction toward replacing property taxes with VAT-based revenue and increasing state responsibility for school finance, but the available record does not show whether lawmakers or stakeholders were supportive, opposed, or divided.
The most notable points of contention are likely the repeal of school district maintenance-and-operations ad valorem taxes, the adoption of a broad VAT on services and property, and the transfer of school finance responsibility from local property taxes to state funding and a new enrichment tax. The bill also raises issues about local taxing authority, voter approval of a constitutional amendment, treatment of existing school bonds, and whether the proposed tax structure would be administratively workable and equitable for businesses, consumers, and school districts.