Texas House Bill HB209

Texas 2021 - 87th 2nd C.S.

Caption

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

Impact

One significant aspect of HB209 is the prohibition on school districts imposing maintenance and operations ad valorem taxes following the enactment of the bill on January 1, 2026, contingent upon the approval of a constitutional amendment by voters. This element of the legislation is intended to create more uniform funding across school districts but raises concerns about the potential loss of local revenue sources for educational financing. In tandem, the bill authorizes school districts to adopt a local enrichment value added tax that can provide additional funding for educational purposes, fostering a more diverse funding structure for public schools.

Summary

House Bill 209 seeks to reform the taxation system within Texas by introducing a state and local value added tax while simultaneously repealing or placing limitations on certain existing state and local taxes, particularly school district maintenance and operations ad valorem taxes. The bill proposes an introduction of a value added tax at a rate of 6.72% applicable to services and property supplied in the ordinary course of business, with exemptions for small businesses, government entities, and other organizations. This tax scheme aims to provide a new revenue source for the state while modifying the landscape of local taxation powers.

Contention

The proposed changes have sparked notable concern among various stakeholders. Proponents argue that the value added tax will simplify the tax code and create a more sustainable revenue source for the state, potentially leading to improvements in public services and education funding. However, opponents highlight the risks associated with repealing the ability of local school districts to levy ad valorem taxes, fearing diminished local control and funding for essential school programs. The debate underscores broader tensions between state and local governance, as well as concerns about long-term implications for education funding and local community needs.