Repeal the Business Gross Receipts Tax?

LA WATCHDOG -  

REPEAL OF LOS ANGELES CITY BUSINESS GROSS RECEIPTS TAX ON VIRTUALLY ALL BUSINESSES OPERATING IN THE CITY, TO TAKE EFFECT AS OF JANUARY 1, 2028. INITIATIVE ORDINANCE. 

The proposed ordinance would repeal the City of Los Angeles’ gross receipts tax on all businesses other than cannabis businesses, effective as of January 1, 2028. Currently, City law imposes a gross receipts tax on businesses in the City at a variable rate ranging from 0.1% to 0.425% of gross receipts derived from business within the City, with higher rates for cannabis businesses. The proposed ordinance would eliminate these taxes on all businesses other than cannabis businesses, resulting in a decrease of the City’s annual tax revenues by approximately $742 million.

A coalition of business organizations has gathered, subject to verification, enough signatures to place on the November ballot the “Los Angeles Cost of Living Relief Initiative” that would repeal the City’s gross receipts tax on businesses.   

This measure will be very controversial. Some will oppose this measure because it is ballot box budgeting. Others are concerned that its passage would have an adverse impact on the City’s already strained budget and finances. And the City’s union bosses will go ballistic because they believe our money is their money.  

Others will welcome the idea of lower taxes. It will force the City to rationalize its inefficient operations and bloated bureaucracy. It will have allow the businesses that employ millions of Angelenos to invest more in their operations, creating even more jobs. It will also simplify the existing ordinance which contains over 24,000 words covering more than 50 pages. 

While this initiative is the response of the tourism industry to the Olympic Wage Ordinance that was approved by the City Council a year ago, the result is now a game of chicken. 

Will the City Council and the Mayor be forced to endorse real budget reform so that voters will reject this initiative? Unfortunately, the politically appointed Charter Reform Commission has punted on real reform despite the easy to implement recommendations of the Neighborhood Council Budget Advocates (see below) and many other recommendations by concerned Angelenos.  

Or will the City Council and the Mayor take the risk that voters will reject this initiative even though they are fed up with City Hall’s fiscal follies, the Structural Deficit, budget busting labor agreements, the underfunding of our deteriorating infrastructure and public safety, the squandering of scarce resources on the homeless, the lack of transparency and accountability and back room dealings, and Chicago style corruption.  

The loss or potential loss of $742 million in revenue will send a strong message to our elected elite bosses that it is time for real fiscal reform despite the opposition of the union bosses.

*************************

The Neighborhood Council Budget Advocates made the following seven recommendations for budget and financial reform.  

1. The Four-Year General Fund Budget Outlook needs to be updated to reflect anticipated raises for City employees. 
2. Develop a two-year budget as recommended by the City Controller.
3. Conduct open and transparent labor negotiations that require significant outreach to Angelenos before, during, and after the negotiations.
4. Place a measure on the ballot that would prohibit the City from entering into any labor agreement that would create a current or future deficit. In the short term, pass an ordinance. 
5. Develop a long-term infrastructure plan to address deferred maintenance and future capital expenditures.
6. Create a robust Reserve Fund that can only be used in declared emergencies, not to balance the budget as is the current procedure.
7. Establish an Office of Transparency and Accountability to oversee the City’s budget and finances in real time as recommended by the LA 2020 Commission. 

(Jack Humphreville writes the LA Watchdog column for CityWatch, where he covers city finances, utilities, and accountability at City Hall. He is President of the DWP Advocacy Committee, serves as the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and is a longtime Neighborhood Council Budget Advocate. With a sharp focus on fiscal responsibility and transparency, Jack brings an informed and independent voice to Los Angeles civic affairs. He can be reached at [email protected].)