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≡ L.A. BUSINESS TAX REPEAL ≡
The latest potential financial crisis to hit the City of Los Angeles will come up for City Council approval on Wednesday (13th) as a ballot initiative has collected sufficient signatures to be placed before Los Angeles voters.
The initiative proposed to repeal the City’s business tax effective 1 January 2028, which is based on gross receipts by businesses within the city and not on net income.
Given the continuing budget crises which Los Angeles faced in its 2025-26 budget and continues to deal with right now in the approval of the 2026-27 budget – which must be finished by 31 May – here’s how serious the new threat is to the 2028 Olympic Games, according to the city’s Chief Administrative Officer, Matthew Szabo:
“Eliminating the business tax would deal an irreparable blow, necessitating an immediate and lasting contraction of public services and fundamentally undermine the City’s ability to prepare for and host the 2028 Olympic and Paralympic Games (2028 Games).
“The sudden, permanent loss of $860 million on average in annual revenue starting in 2027-28 would coincide exactly with the final, most intensive preparation phase for the 2028 Games. This fiscal vacuum would jeopardize the city-wide mobility and transit enhancements currently being planned to accommodate millions of visitors. Furthermore, the projected deep cuts to public safety and public works services would severely degrade the City’s capacity to provide the essential security, sanitation, and emergency response levels required for a global event of this magnitude.
“By stripping the General Fund of its second-largest tax revenue source just as these international obligations peak, the repeal would shift the City from a position of growth and readiness to one of permanent structural austerity, leaving it ill-equipped to fulfill its commitments to the world stage.”
The initiative’s backers, who collected 79,317 public signatures, had their petition certified by the City Clerk on 23 March 2026 and it is in line to be placed on the 3 November 2026 election ballot. The measure was created by business interests to try and reduce the business tax burden in the City of Los Angeles, the latest chapter in a long tug-of-war between businesses and labor groups over costs, wages and benefits.
The Chief Administrative Officer’s report casts passage of the measure in catastrophic terms for the finances of the City:
● “The adoption of the proposed initiative ordinance repealing the business tax on non-cannabis business activity would result in an annual General Fund revenue loss of $860 million on average for the first five years starting in fiscal year 2027-28.
“The average annual loss would increase every year. The cumulative negative impact resulting from this tax repeal over the next ten years would be $9.6 billion. This would require immediate and significant reductions in City services and would severely impact the City’s long-term financial stability.”
● “The scale of the revenue loss – representing roughly 10 percent of the General Fund and 12 percent of all unrestricted revenue – is unprecedented. To manage a shortfall of this magnitude amid existing structural deficits and rising contractual obligations, the City would be forced to implement austerity measures far more severe than those seen during the Great Recession or the COVID-19 pandemic.
“While those previous crises were significant, they were ultimately transitory shocks followed by recovery. In contrast, the permanent elimination of the City’s second-largest tax revenue stream would open a massive, structural fiscal gap requiring immediate, ongoing service reductions.”
Just as a precaution if the measure is approved for a vote – for which it has qualified – the Chief Administrative Officer’s report states that the City would need to (1) start saving money immediately; (2) limit new hires to just six months of funding; (3) freezing all unfunded positions in the new budget; (4) prepare for a “fiscal emergency” in case of passage, including no new hires, a list of positions to be eliminated, deferment of contracts and capital projects, discussions with unions on cancellation of wage increases, and as for public safety, “suspend police sworn hiring for 2026-27 beginning with the cancellation of the January 2027 police class.”
The recommended City Council’s instructions would also include:
“Direct the City Administrative Officer to report to the City Council and Mayor on the impact the required cuts will have on the City’s preparation for the 2028 Olympic and Paralympic Games including its ability to meet its obligations as a Host City and provide the services required under service agreements established with the Los Angeles Organizing Committee for the 2028 Olympic and Paralympic Games (LA28).”
Given the certification of sufficient signatures, the City Council appears to have no choice but to approve the initiative for the November ballot. Once placed there, the stakes for the City will be high, as well as for the security and services planning for the 2028 Games.
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Also on Wednesday, the Council will consider a modification to the “Olympic wage” ordinance which was won by labor unions representing airport and airport-area hotel workers for raises in their minimum wages to $30.00 by 1 July 2028.
A motion by Council President Marqueece Harris-Dawson on 5 December 2025 asked to have the law changed to have the increases introduced more slowly, with the $30.00 wage taking effect on 1 July 2030.
The unions are strongly against the change and will no doubt rally many loud supporters at Wednesday’s meeting. But the City is also under pressure from businesses which are involved in airport operations and airport-area hotels, who are now paying these higher wages and benefits.
The City Council debate should be fascinating.
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