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Bill

HB 116

Relating to the repeal of or limitations on certain state and local taxes, including school district maintenance and operations ad valorem taxes, the enactment of state and local value added taxes, related school finance reform, and directing the comptroller to identify alternatives to local ad valorem taxes; imposing taxes.

89th Legislature, 1st Called Session (2025) Introduced by Jay Dean

Texas bill replacing school property taxes with value-added taxes while directing finance reform study and alternative revenue exploration statewide.

Filed
#comptrollerofpublicaccounts(v2608) #education--primary&secondary--finance(i0250) #foundationschoolfund(s0734) #interimstudies(i0448) #taxation--property-taxrate(i0794) #taxation--sales(i0800) #taxation--schooldistrict(i0785)
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Bill Summary · HB 116

Legislative bill overview

HB 116 proposes a significant restructuring of Texas school finance by repealing or limiting local school district property taxes (ad valorem taxes) while implementing state and local value-added taxes (VAT) as alternative revenue sources. The bill directs the state comptroller to study additional alternatives to property tax funding and requires comprehensive school finance reform.

Why is this important

This represents a fundamental shift in how Texas funds public education, moving away from property-tax-dependent systems that create funding disparities between wealthy and poor districts. The change would affect both school budgets and tax burdens for all Texas residents and businesses, making it one of the most consequential fiscal policy proposals for the state.

Potential points of contention

  • VAT implementation complexity: Value-added taxes are administratively complex and have not been used statewide in Texas; implementation challenges and business compliance costs could be significant
  • Tax burden redistribution: While reducing property taxes, a VAT would shift costs to consumption, potentially affecting lower-income households disproportionately depending on tax rates and exemptions
  • Funding adequacy: Without detailed revenue projections, unclear whether VAT revenues would fully replace property tax funds, potentially underfunding schools during transition
  • Political feasibility: Represents major tax system overhaul requiring substantial legislative and voter support; previous similar efforts in Texas have faced resistance

Compiled from official sources — confirm details with the bill’s official record.

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