When Los Angeles Councilmember and Budget Committee Chair Katy Yaroslavsky spoke about the gross receipts tax repeal initiative before the City Council last week, she dismissed it as “unserious” and a “temper-tantrum” by the business community for not “getting its way” on living wage issues.
That framing ignores the long, bipartisan record behind gross receipts tax reform in Los Angeles and mischaracterizes a serious effort to keep employers, jobs and investment in the city.
Just over a decade ago, former Democratic Mayor and presidential candidate Ambassador Eric Garcetti championed eliminating the gross receipts tax when he served as council president and later as mayor. “Our current policies are costing us jobs and revenue,” said Garcetti in 2012. “Our economy is contracting and we’re losing jobs and that’s because of this job-killing tax.”
Two separate city-sanctioned and funded blue-ribbon commissions, the Business Tax Advisory Committee and BTAC 2.0, reviewed the issue and recommended phasing out the gross receipts tax because studies showed it would increase overall tax revenue to the city by attracting more businesses to Los Angeles and generating more economic activity, including higher sales tax revenue from more workers and customers spending money locally.
Those commissions were not throwing a “temper-tantrum”; they were following the data and urging the city to modernize an outdated tax structure.
The Los Angeles gross receipts tax is an unfair and anti-growth tax that hits businesses at the worst possible point: before they have even earned a profit.
By taxing a business’s gross revenue rather than its actual profit, the tax discourages new employers from locating in Los Angeles and punishes existing businesses for growing and increasing their gross receipts.
The result is higher operating costs that inevitably get passed on to consumers, which is why a cup of coffee is often cheaper in neighboring cities like Burbank or Glendale, where businesses are not saddled with a gross receipts tax.
This is not a theoretical concern.
Businesses are leaving Los Angeles, and each week seems to bring a new headline about a long-established restaurant or major employer choosing Phoenix, Houston or another more predictable market instead of our city.
KB Home, a longtime Los Angeles-based corporation, recently announced it is moving its headquarters to Phoenix because it has become too difficult and costly to do business here, while historic establishments like Cole’s downtown have closed their doors after a century, citing that Los Angeles has “lost its way” as a feasible place to operate.
These are not unserious actors; they are pillars of the local economy that employ our residents and sustain our tax base.
In the coming weeks, the Los Angeles City Council will decide whether to place the gross receipts tax repeal initiative on the ballot.
Voters should have the opportunity to weigh in on whether Los Angeles will remain competitive and support quality jobs, and make it clear that a fair, predictable business climate and affordability for residents are serious priorities.
Supporting the repeal is not about indulging a tantrum; it is about aligning our tax system with economic reality and giving employers a reason to stay, grow and invest in Los Angeles.
Stuart Waldman is president of the Valley Industry & Commerce Association, which, along with Central City Association, the Los Angeles Area Chamber of Commerce and the Greater San Fernando Valley Chamber of Commerce, put forward the Los Angeles cost of living relief initiative.