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, not exceeding 0.5%, to fund enrichment activities, while prohibiting the imposition of maintenance and operations ad valorem taxes after January 1, 2030, contingent upon voter approval of a constitutional amendment.

Additionally, the bill mandates the comptroller to prepare a report on necessary changes to implement the new tax structure and outlines the transition for school districts from maintenance and operations tax revenue to state funding and enrichment VAT revenue. It repeals several provisions from the Tax Code and Education Code that are inconsistent with the new tax framework. The effective date for most provisions is set for January 1, 2030, with some sections taking effect earlier or contingent upon other provisions.

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)