Texas House Bill HB3770

Texas 2021 - 87th Regular

Caption

Relating to the repeal of or limitations on certain state and local taxes, including ad valorem taxes, the enactment of state and local value added taxes, and related school finance and administration reform; imposing taxes.

Impact

A crucial aspect of HB 3770 is the prohibition on political subdivisions imposing ad valorem taxes unless explicitly authorized by the legislature. This requirement effectively reduces the authority of local governments to levy taxes without state approval, centralizing tax power at the state level. The bill also mandates that any revenue generated from the new value added taxes be allocated to the general revenue fund, which could have implications for local fund distribution and overall school financing.

Summary

House Bill 3770 proposes significant reforms to state and local taxation structures, primarily focusing on the repeal or limitation of certain taxes such as ad valorem taxes and the introduction of value added taxes (VAT) at both the state and local levels. The bill outlines specific definitions and frameworks for implementing a 6.72% VAT on services and properties supplied in the ordinary course of business. This shift aims to streamline tax collection and administration, as well as to generate funding for the state’s general revenue.

Contention

The proposal has sparked debates regarding local control over taxation and the impact on local services funded by ad valorem taxes. Advocates argue that the changes will create a fairer tax structure and funding mechanism for education, potentially leading to increased resources for schools. However, opponents express concerns about the diminished fiscal autonomy of local governments, which could lead to essential public services being underfunded. The necessity of voter approval for certain elements of the bill, such as constitutional amendments to prohibit ad valorem taxes, further adds to the complexity and contention surrounding this legislation.