Texas House Bill HB92

Texas 2025 - 89th 2nd C.S.

• Filed: 8/15/25

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

Should HB 92 be enacted, it would overhaul how school districts are funded by prohibiting the imposition of maintenance and operations ad valorem taxes beginning January 1, 2030. This prohibition is contingent upon the approval of a constitutional amendment that restricts such local taxation. The transition to value added taxes would necessitate substantial adjustments in how education is financed, as state appropriations would increase to cover the funding formerly generated by local taxes. This shift means that local districts would have limited capability to raise revenue independently, potentially creating challenges in meeting their operational needs similar to those before the introduction of new state funding mechanisms.

Summary

House Bill 92 proposes significant tax reform in Texas by repealing or limiting certain state and local taxes, specifically targeting school district maintenance and operations ad valorem taxes. It aims to introduce both state and local value added taxes (VAT), which would apply to the supply of services and property in the course of business. Under the proposed legislation, a VAT rate of 6.72 percent would be imposed on taxable receipts, while local jurisdictions could impose additional VATs at a combined maximum rate of two percent. The bill includes provisions for exemptions aimed at small businesses and governmental entities, indicating an intent to alleviate tax burdens on specific groups while generating revenue for the state.

Sentiment

The sentiment surrounding HB 92 appears to be mixed, with proponents advocating for a modern tax structure meant to simplify taxation and improve revenue consistency across the state. Advocates view the measure as a necessary progression in Texas's tax policy, providing a more predictable funding source for education. Conversely, critics express concern that eliminating ad valorem taxes will lead to disparities in school funding, particularly affecting districts that rely heavily on local tax revenues. The debate encapsulates broader tensions between maintaining traditional funding methods and adopting new revenue frameworks. Stakeholders worry about the adequacy of state provisions to meet local education needs following the transition.

Contention

Central to the debate about HB 92 is the question of local control versus state oversight of taxation and funding. Opponents of the bill highlight that the prohibition of local ad valorem taxes might diminish district autonomy and adaptability in addressing specific educational needs. Moreover, the reliance on state-managed VAT as a singular funding source raises concerns about the potential for bureaucracy and inefficiencies. Critics are apprehensive that the proposed value added taxes may not generate sufficient revenue to compensate for the loss of ad valorem tax funds, particularly in economically diverse regions. The ongoing discussions also emphasize concerns regarding the long-term sustainability of the new funding model and its impact on the educational landscape in Texas.

Texas Constitutional Statutes Affected

Tax Code

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

Education Code

• Chapter 45. School District Funds
  • Section: 0032
  • Section: 0032

• Chapter 48. Foundation School Program
  • Section: New Section
  • Section: 2551
  • Section: 2552
  • Section: 2553
  • Section: 275
  • Section: New Section
  • Section: 2551
  • Section: 2552
  • Section: 2553
  • Section: 275

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