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from www.latimes.com – Determined to find a new solution to Los Angeles’ budget crisis, City Council President Herb Wesson said Tuesday he wants his colleagues to prepare a half-cent sales tax hike proposal for the ballot in the March municipal election.
Wesson said such a measure would generate $220 million for the city, which has faced a shortfall every year since the nation’s financial meltdown in 2008. A public opinion poll has already identified a citywide sales tax hike as a “viable” proposal in an election, Wesson said.
“We’ve cut just about everything that we can cut. I can’t say if we do this, we’ll never have a budget shortfall again,” Wesson, the council president, said.
“But this will help us for now, if we’re successful.”
Wesson said he would like the council to draft the half-cent sales tax proposal on Wednesday, with a final vote on whether to put it on the ballot in mid-November.
For the last four weeks, council members have proposed various tax hikes for the upcoming election, including an increase in the levy on parking lots, a $39 per parcel property tax to pay for public parks and an increase in the tax on real estate sales. Wesson said all of those ideas would go away if the council embraced his sales tax hike, which could add a half-cent on every dollar of retail sales throughout the city.
The proposal drew sharp questions from Carol Schatz, president of the Central City Assn., an L.A.-based organization that advocates for businesses. Schatz said she was worried that a higher sales tax would add to L.A.’s image as a city unfriendly to business. And she warned that such a measure would put the city at a competitive disadvantage, prompting residents to make major purchases in neighboring cities.
“You don’t surprise a whole city with a sales tax proposal with less than 24 hours’ notice,” she said. “Something like that needs a lot of discussion and evaluation.”
Wesson argued that if even if the sales tax reduced business activity, and caused his projection of new revenue to drop from $220 million to $205 million, the city would still be “in better shape than we were before.”
The proposed sales tax hike comes as the city’s top budget analyst, Miguel Santana, is predicting a budget shortfall of $216 million next year — assuming the city carries out plans for laying off more than 200 workers. If the sales tax were enacted, Wesson’s tax measure would “solve virtually the entire problem,” Santana said.
Without such a tax, a $327-million shortfall is expected the following year, even with proposed layoffs of city workers, according to Santana’s latest budget report.
Wesson said he wanted city policy analysts to prepare a report on the possible loss of business activity from a sales tax hike and present their findings on Nov. 9. Days later, the council would decide whether to place the proposal on the ballot, he said.
[For the record, 2:45 p.m. Oct. 30, 2012: An earlier version of this post said that without the sales tax, a $347-million shortfall was expected.]