L.A. Chamber Makes a Bad Bargain on Sales Tax Hike

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

The Los Angeles Chamber of Commerce agreed to support a half-cent sales tax hike to help the city out of a budget hole in exchange for a promise that the City Council will create a Commission on Fiscal Sustainability. Not much of a bargain when you consider that commission recommendations usually go nowhere. I know. I’ve participated on six state commissions and one county commission. Total changes out of those commission recommendations? Zero.

Securing a promise for a commission will do little to find the savings necessary to balance the budget. Especially, since the sales tax measure is hardly a sure thing at the polls. All five major mayoral candidates oppose the sales tax.

The business community is split. While the Los Angeles Chamber endorsed, the equally influential Valley Industry and Commerce Association (VICA) opposed the tax.

One reporter noted that the LA Chamber usually is adverse to tax increases. Not exactly. I don’t have a tally sheet in front of me but it seems to me they have not opposed many taxes lately. In the most recent election, the Chamber took no position on Proposition 30, which increased the state income and sales tax, and said yes to Measure J, an extension of the sales tax for transportation. Now they jumped on board the city sales tax wagon.

In this case, LA Chamber said supporting the tax was necessary because public safety was threatened without new revenue. The half-cent sales tax, which would increase the Los Angeles City sales tax rate to 9.5% if passed, would raise about $215 million a year – almost exactly the amount of the city deficit, according to some city officials.

However, others have challenged the size of the deficit. Matt Szabo,  candidate for city council and former budget advisor to Mayor Antonio Villaraigosa said that the deficit may be less than half what is projected.

While the Chamber hopes that a plan dealing with improvements in city spending and public employee retirement obligations would come out of the Fiscal Sustainability Commission, the leverage for change would be gone if the taxes are increased.

Why aren’t reforms on the same ballot with the taxes? If history serves as a guide, after the taxes pass, reforms slip so far down the agenda it’s as if they have dropped into a bottomless well.

Business is concerned about the city’s business tax, the poor business climate, and competition from nearby cities that don’t punish their businesses with excessive burdens. But, there was no improvement offered by the city in exchange for an endorsement on the tax beyond ‘we will take a look at the problem later.’

Not nearly good enough. The business community must negotiate a better deal or continue to suffer difficult business conditions in LA.

Share this article: Share on FacebookTweet about this on TwitterShare on LinkedInPin on PinterestEmail this to someone

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.