Introduction
In a significant move, the Los Angeles City Council has approved a ballot measure that aims to temporarily raise the hotel tax in light of the upcoming 2028 Olympic Games. This decision is seen as an effort to boost city tax revenues during a period of anticipated increased tourism.
Details of the Tax Increase
The approved ballot measure proposes a temporary increase of 2% to the city’s existing 14% transient occupancy tax, commonly referred to as the hotel tax. This temporary rate is intended to remain in effect until the conclusion of the Olympics, with a subsequent permanent 1% increase starting in 2029.
Councilmember Tim McOsker emphasized the necessity of this increase, stating, “Two percent is a pretty significant jump, but it’s a jump that’s justified by the Olympics.” The estimated revenue generated from the temporary increase is projected to amount to approximately $44 million per fiscal year, while the permanent increase is anticipated to yield about half that amount post-2028. This funding will be allocated toward general city services including emergency response, park maintenance, and sidewalk repairs.
The proposal for the increased hotel tax follows a broader discussion on the economic pressures faced by the city, particularly following recent adjustments to the minimum wage for hotel workers.
Opposition to the Measure
Despite the council’s approval, there is notable opposition regarding the potential impact of this tax increase on the hotel industry, which is currently experiencing challenges such as rising labor costs and decreased demand. Critics argue that imposing additional taxes during this precarious time could drive tourists to hotels in neighboring areas, ultimately harming Los Angeles’ hospitality sector.
Nella McOsker, President of the Central City Association, remarked, “At a time when you’re seeing these declines in demand and losing on tax revenue year over year to the magnitude of $20 million, it just seems like a wrong time to impose more burdens on that shrinking base.” Councilmember Monica Rodriguez also voiced her concerns, questioning the council’s responsibility in managing expenses before asking constituents to pay more taxes.
In addition to the hotel tax measure, the council has also moved to address illegal cannabis businesses by proposing a measure that aims to close existing tax loopholes, thereby facilitating better revenue collection from these enterprises.
Both the hotel tax and the cannabis tax proposals will be presented to voters on June 2, coinciding with the primary elections in Los Angeles.
