Texas House Bill HB61

Texas 2025 - 89th 1st C.S.

• Filed: 7/14/25

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 implications of HB 61 are far-reaching, especially in how it affects school funding and local tax authorities. It outright prohibits school districts from imposing ad valorem taxes for maintenance and operations purposes, set to take effect in January 2030. However, school districts could still implement a limited enrichment value added tax for additional educational resources, which can be a critical source of revenue. Overall, the intent is to shift the financial dependencies from local property taxes to state-level revenue models, potentially equalizing funding across diverse districts.

Summary

House Bill 61 proposes significant changes to the taxation structure in Texas by implementing a state and local value added tax, while simultaneously repealing or limiting certain state and local taxes including those related to school district operations. The bill stipulates that a value added tax will be applied at a rate of 6.72% on services and goods provided in the ordinary course of business. The legislation's intent is not only to generate revenue but also to streamline the collection and administration of taxes, enhancing predictability for both taxpayers and the state government.

Contention

While supporters laud the bill for modernizing the tax framework and ensuring consistent funding for education, critics argue that the transition could destabilize funding mechanisms previously relied upon by school districts. Additionally, there are concerns regarding the adequacy of the proposed school district enrichment tax to cover future educational needs. As political discussions unfold, there will likely be strong opinions on whether the benefits of simplified tax structures outweigh the risks of reduced local control over fiscal decisions.

Texas Constitutional Statutes Affected

Education Code

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