H.B. No. 98 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 may impose a local VAT, but not a sales or use tax, and the combined local VAT rate is capped at 2%, excluding school district enrichment taxes. The bill also allows school districts to adopt a school district enrichment VAT, limited to 0.5%, which must be used exclusively for school enrichment activities.

Additionally, the bill includes provisions for the repeal of various sections of the Tax Code and Education Code, specifically targeting regulations related to school district maintenance and operations taxes. It establishes a framework for transitioning school funding from maintenance taxes to state funding and enrichment VAT revenue, ensuring that school districts can still pursue enrichment programs. The effective date for most provisions is set for January 1, 2030, contingent upon the approval of a constitutional amendment prohibiting school districts from imposing 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 Education Code 6, The following provisions of the Tax Code 6)