H.B. No. 99 proposes significant changes to the taxation system in Texas, specifically targeting school district maintenance and operations (M&O) ad valorem taxes. The bill seeks to repeal the authority of school districts to levy M&O taxes starting in the 2030 tax year, with all related provisions being eliminated effective January 1, 2030. In place of these taxes, a state value-added tax (VAT) will be imposed on the value added to goods and services at each stage of production or distribution, with an initial rate set at 6.72%. Revenue generated from this VAT will be allocated exclusively to the Foundation School Fund to support public education operations previously funded by M&O property taxes. The implementation of this VAT is contingent upon the approval of a constitutional amendment by voters that prohibits school districts from imposing M&O ad valorem taxes.

Additionally, the bill mandates a comprehensive study by the comptroller of public accounts to explore the feasibility of replacing all local property taxes with local value-added taxes. This study will assess various factors, including revenue needs, rate structures, and economic impacts, and is expected to be completed by December 1, 2026. The legislature intends to use the findings from this study to draft legislation aimed at eliminating remaining local ad valorem taxes and replacing them with local VATs, effective January 1, 2030. The overall act is set to take effect 91 days after the end of the legislative session, with specific provisions taking effect on January 1, 2030, contingent upon the approval of the aforementioned constitutional amendment.

Statutes affected:
Introduced: Subtitle E, Title , Tax Code 1.02, The following provisions of the Tax Code 2.01, The following provisions of the Education Code 2.02 (Subtitle E, Title , Tax Code 1, The following provisions of the Tax Code 2, The following provisions of the Education Code 2)