As the March 5 primary nominating elections for the Los Angeles mayoral race draws near, the mayoral candidates continue to push their policy stances to clinch the remaining bit of votes. With the L.A. city government facing a projected $327 million shortfall, city finances have become a centerpiece of the election.

Of particular interest in this mayoral election cycle is the question of whether the candidates would support eliminating the gross receipts tax. Like the sales tax, the gross receipts tax generates revenue by taxing the gross revenue of a company. With the tax generating nearly $430 million in revenue, the question as to whether the mayoral candidates would cut the tax has become a divisive issue.

Candidate Eric Garcetti currently supports eliminating the city’s gross receipts tax. In a questionnaire conducted by the Los Angeles Times, Garcetti said,  “the city’s gross receipts tax puts the city of L.A. at a competitive disadvantage.”

Like Garcetti, candidates Wendy Greuel, Emanuel Pleitez and Kevin James have publicly supported eliminating the gross receipts tax in the same questionnaire.

Greuel said, “Through the elimination of the business tax, the city will see more job creation and economic development.”

Pleitez and James have said similar things, with Pleitez saying, “it overburdens companies, especially small and medium-sized businesses, and makes it difficult for them to invest and hire in Los Angeles," and James stating that “it is necessary to eliminate the city’s ‘gross receipts’ method of calculating the business tax in order to spur business activity.”
   
Councilwoman Jan Perry is opposed to cutting the gross receipts tax.

“The Gross Receipt Tax, Property Tax and Sales Tax are the three top sources of revenue for the city. Eliminating the Gross Receipts Tax would add $400 million more to our already strained budget deficit,” said Perry in the same L.A. Times' questionnaire.

Perry has articulated a point that her other candidates have failed to bring up. Although her opponents contend that removing the gross receipts tax would be beneficial to business, Perry finds that no solution has been suggested to make up the lost revenue from cutting the tax.

L.A. county supervisor and former mayoral prospective candidate Zev Yaroslavsky has likewise expressed a concern over eliminating the city’s gross receipts tax. According to Yaroslavsky, the tax cut would only increase the city’s $220 million dollar deficit.

Yaroslavsky has taken particular aim at the mayoral candidates who have supported cutting the gross receipts tax.

“Right now they seem more focused on the election," Yaroslavsky said. "I understand that. But I think that being totally oblivious, or giving the impression they are totally oblivious, to the fiscal risks the city faces."

Garcetti believes that the increase in business would offset the effects of a tax cut. Garcetti has said, “recent examples and studies have shown that when we have lowered the city’s gross receipts tax, we attract new businesses, retain existing businesses, create jobs for Angelenos and generate more tax revenue.”

Greuel also supports a gradual elimination of the gross receipts tax, stating, “Going forward, I support a phased-in approach of eliminating the city’s gross receipts tax, with triggers that only cuts taxes when revenue milestones are hit.”

Like Garcetti, she believes that the revenue generated by increased business would offset any loss in revenue.

But Yaroslavsky still believes that the mayoral candidates want to eliminate the tax strictly for votes, and has called for an end to “sound bites and platitudes and promises.”

 

Reach Staff Reporter Edward Loera here and follow him on Twitter here