H.B. No. 61 proposes significant changes to the taxation structure in Texas, particularly concerning state and local taxes, including the repeal of school district maintenance and operations ad valorem taxes. The bill introduces a state value added tax (VAT) of 6.72% on services and property supplied in the ordinary course of business, with exemptions for small businesses, governmental entities, and certain organizations. Local subdivisions are prohibited from imposing sales or use taxes but may implement local VATs, with a maximum combined rate of 2%, excluding school district enrichment taxes. The bill also allows school districts to adopt a school district enrichment VAT at a maximum rate of 0.5%, with revenue earmarked for school enrichment activities and facilities.

Additionally, the bill outlines the repeal of various provisions in the Tax and Education Codes, specifically targeting sections related to existing tax structures that conflict with the new VAT framework. The prohibition on school district maintenance and operations ad valorem taxes is contingent upon the approval of a constitutional amendment by voters. The bill mandates that the comptroller prepare a report on necessary changes to implement these reforms and establishes a timeline for the transition to the new funding model, which is set to take effect on January 1, 2030, provided the constitutional amendment is approved.

Statutes affected:
Introduced: The following provisions of the Tax Code 6.01, The following provisions of the Education Code 6.02 (The following provisions of the Tax Code 6, The following provisions of the Education Code 6)