Taxpayer Protection Act Must Be Enacted

Taxpayer Protection Act Must Be Enacted

“This is going to be a nightmare … We’re just screwed,” lamented “Selling Sunset” star Mary Fitzgerald to co-star Nicole Young. Throwing up her hands during Episode 1 of Season 7, the reality star didn’t equivocate in a face-to-camera explanation of Los Angeles’ new so-called Mansion Tax.

In April 2023, the city witnessed the enactment of the United to House Los Angeles measure, popularly known as the Mansion Tax. Measure ULA has marked a significant shift in the city’s approach to real estate taxes, establishing a 4% to 5.5% documentary transfer tax on property sales exceeding $5 million. While its intent may have been noble – aiming to address affordable housing and homelessness – the reality of its impact has had severe unintended consequences, causing far more problems for business owners and homeowners than it solved. 

Measure ULA is projected to generate $150 million this year, far short of the $900 million initially promised. The lack of tax revenue is unsurprising, as sales of apartments and commercial and industrial properties have fallen off a cliff since ULA went into effect.  

Fortunately, relief is in sight. As the November election approaches, the Taxpayer Protection Act, a  statewide ballot referendum, offers a chance to fix what Measure ULA has broken. If passed by Californians, the Taxpayer Protection Act would require that Measure ULA go back to the ballot for another vote – this time with Angelenos understanding the real-world impacts. 

Contrary to how it was marketed, ULA is not merely a tax on luxury homes. In reality, it expansively targets a range of properties, including apartment buildings, hotels, vacant land and commercial real estate. With homelessness and drug addiction crises reaching critical mass, the need to address these issues in a serious way is absolutely vital. 

Unfortunately, as it turned out, Measure ULA fell far short of a thoughtful policy solution, as the tax – nearly eight times the current transfer tax – is causing a discernible recessionary impact in real estate sales in Los Angeles, which will only make the housing crisis worse. This decline not only affects the housing market but also the broader economic landscape of the city.

Intentional or not, the ULA penalizes new housing projects, particularly multi-family developments. By increasing taxes and changing the economic viability of these properties, fewer developers are willing to build projects in Los Angeles. ULA is starting to freeze badly needed construction of both market-rate and affordable housing, leading to escalated rents and potential displacement of residents.

In fact, economists from UCLA predicted that Measure ULA could hurt new multifamily housing construction and cause rents to increase before it even passed. The results since then have confirmed this prediction. When the “Selling Sunset” star told audiences we were “screwed” as a result of the ULA, it was a straightforward summation of the policy’s impact.

ULA is starting to freeze badly needed construction of both market-rate and affordable housing, leading to escalated rents and potential displacement of residents.

Unless this tax is reversed, the decline in the entire Los Angeles real estate market will accelerate.

Enter the Taxpayer Protection Act. Set for the November ballot, it is a comprehensive reform designed to introduce greater accountability and transparency in local taxation. Most importantly for the City of Los Angeles, it proposes a return to the two-thirds voter approval for new local special tax increases qualified by initiative, a check and balance that was bypassed in ULA’s passage. 

That means L.A. voters will get another chance to vote on Measure ULA and correct the major policy damage that has been done. 

The Taxpayer Protection Act is not just about undoing ULA. It’s about a transparent and accountable long-term check and balance that empowers the voters of California with the right to decide which new taxes they are willing to pay at the state and local level in the future. 

But state and local politicians do not want you to have that right, just like they are unwilling to fix Measure ULA. L.A. needs and deserves more thoughtful leadership and more creative solutions on these issues. In California, the cost of living is just too damn high. Passing the Taxpayer Protection Act this November will help to get L.A. on that path. 

Rob Lapsley is the president of the California Business Roundtable and co-chair of the Taxpayer Protection Act. 

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