Los Angeles Business Journal

L.A. Council Moves to Put Sales Tax Hike on Ballot

By Howard Fine Tuesday, November 13, 2012

EDITOR'S NOTE: This story has been corrected to reflect that the state sales tax increase will begin on January 1.

The Los Angeles City Council on Tuesday gave preliminary approval to place a half-cent sales tax increase on the March ballot.

If the council’s 10-4 vote is ratified next week and Mayor Antonio Villaraigosa signs the measure, city voters will decide whether to hike the sales tax rate to 9.5 percent starting July 1. The current rate in Los Angeles is 8.75 percent, but that will increase to 9 percent on January 1 because of the statewide sales tax increase voters approved last week with Proposition 30.

The half-cent increase would generate an estimated $215 million a year that would go to shore up the city’s general fund, which is running a deficit of around $220 million a year.

But Villaraigosa said in a letter to the council last week that he would support the sales tax increase only if it’s accompanied by cost-saving measures, such as contracting out management of the Los Angeles Zoo and Los Angeles Convention Center.

Business groups are wary of the sales tax increase, saying it could cost merchants in the city some business. They cited a city staff analysis showing that some residents would shop for big-ticket items, such as home appliances, at stores outside city limits with lower sales tax rates.

In choosing to move forward with the sales tax increase measure, the council rejected three other alternatives, including increases in the parking tax and the real estate transaction tax.

Councilmembers Eric Garcetti and Jan Perry, both running for mayor on the same March ballot, were among the four members who voted against putting the sales tax hike on the ballot.