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.
If enacted, HB 117 would significantly alter the funding mechanisms for school districts across Texas. School districts would lose the authority to impose maintenance and operations ad valorem taxes as of January 1, 2026, leading to a transition toward value added taxes. This shift is intended to encourage equitable funding across districts while dedicating proceeds from the new tax to support educational initiatives and infrastructure. Revenue from the newly established taxes is aimed to fund the Foundation School Program, establishing a basic allotment for schools to ensure effective educational delivery.
House Bill 117 seeks to redefine the tax structure in Texas by repealing certain state and local taxes, notably including school district maintenance and operations ad valorem taxes, and introducing a value added tax at both state and local levels. The bill outlines a state value added tax at a rate of 6.72% on the supply of goods and services, while allowing local jurisdictions to impose their own value added taxes under specified conditions. The overall goal of the bill is to simplify and stabilize tax revenues while enhancing funding for public education in Texas.
The proposed transition raises concerns among various stakeholders, primarily regarding the adequacy of funding for education under the new system. Critics argue that eliminating traditional ad valorem taxes may disproportionately impact lower-income districts, potentially leading to disparities in educational quality. Additionally, there is apprehension over the reliance on a value added tax, which could be less stable than existing revenue sources. Some lawmakers and education advocates are calling for comprehensive assessments and guarantees to ensure that funding levels are maintained and that all students benefit equally from the transition.