Texas House Bill HB130

Texas 2025 - 89th 1st C.S.

• Filed: 7/18/25

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

The implementation of HB130, primarily effective from January 1, 2030, will eliminate the capacity for school districts to impose maintenance and operations ad valorem taxes, which are a significant revenue stream for public education. Instead, the bill permits school districts to adopt a local enrichment value-added tax that can be used solely for enrichment facilities and related activities. This shift aims to standardize school funding and enhance educational opportunities while relying more on state-level appropriations for public schools.

Summary

House Bill 130 seeks to overhaul the current taxation structure in Texas by introducing a value-added tax (VAT) while repealing or limiting certain existing state and local taxes, including school district maintenance and operations ad valorem taxes. The bill proposes a 6.72% VAT on services and goods supplied in the state, with provisions for exemptions for small businesses, governmental entities, and other specified organizations. The revenues generated from the VAT are set to replenish the general revenue fund and support educational financing reforms.

Contention

The bill's approach has elicited criticism from various stakeholders who argue it undermines local control and could lead to funding disparities among school districts. Proponents assert that the VAT will create a more consistent revenue base, while opponents express concern over potential adverse effects on local education financing. The requirement for voter approval of a constitutional amendment to prohibit school districts from levying ad valorem taxes further complicates the bill and reflects existing tensions over taxation authority between state and local levels.

Texas Constitutional Statutes Affected

Tax Code

• Chapter 142. Simplified Sales And Use Tax Administration Act
  • Section: New Section

Education Code

• Chapter 49. Options For Local Revenue Levels In Excess Of Entitlement
  • Section: New Section

• Chapter 48. Foundation School Program
  • Section: New Section