H.B. No. 77 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 political subdivisions are prohibited from imposing sales or use taxes but may implement local value added taxes, capped at 2%, while school districts can adopt a school district enrichment VAT not exceeding 0.5%. The bill also mandates that all proceeds from these taxes be deposited into the general revenue fund.

Additionally, the bill outlines a transition plan for school districts to shift from reliance on maintenance and operations taxes to state funding and enrichment VAT revenue. It includes provisions for the comptroller to assist in this transition and requires school districts to submit detailed transition reports. The bill repeals several provisions of the Tax Code and Education Code related to the previous tax structure, ensuring that tax liabilities accrued before the effective date remain enforceable. The effective date for most provisions is set for January 1, 2030, contingent upon the approval of a constitutional amendment prohibiting school district maintenance and operations ad valorem taxes.

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)