LA Wants Your Input on Proposed Tax Increases for Hotels and Unlicensed Cannabis Businesses
Los Angeles City Council Approves Tax Measures for June Ballot
The Los Angeles City Council voted on Tuesday to place three tax-related measures on the June 2 primary ballot, seeking to adjust the transient occupancy tax and impose a tax on unlicensed cannabis businesses. The resolution passed with a vote of 13-2.
Council members Monica Rodriguez and John Lee opposed the measure, which aims to increase the transient occupancy tax, commonly referred to as the hotel tax, by 2% through 2028. After that period, the tax would decrease by 1%. The current transient occupancy tax (TOT) stands at 14%; however, neighboring municipalities like Malibu, Santa Monica, and Beverly Hills have higher rates of 15%.
A unanimous vote also approved a measure to alter the TOT, extending its applicability to online travel and booking companies. Additionally, a separate measure to tax unlicensed cannabis businesses received a 14-1 vote, with Rodriguez again opposing it.
Proponents of these tax changes assert that the burden will primarily fall on tourists and visitors rather than local residents. They point to upcoming mega events such as the 2026 World Cup, 2027 Super Bowl, and the 2028 Olympic and Paralympic Games as opportunities for increased tourism revenue.
Rodriguez emphasized the need to include short-term rentals in the TOT as a means to bolster hotel occupancy and discourage misuse of residential properties for short-term stays. She criticized previous adjustments to the short-term rental ordinance, stating they created "extra hurdles" and instability within the hotel industry.
"Now we’re going to tack on more added costs," Rodriguez remarked, concerned that increased rates might drive tourists to seek accommodations in nearby cities. She expressed reluctance to support the TOT increase without first addressing financial mismanagement and waste within city spending.
In contrast, Councilman Tim McOsker supported the TOT increase, framing it as a logical step to capitalize on the upcoming Olympic Games. "This opportunity is going to add some jet fuel to our visitor-serving community," he noted. McOsker previously proposed a more substantial increase during major events.
Councilwoman Eunisses Hernandez suggested a simpler flat 2% increase, but her motion was narrowly defeated. She warned that a tiered tax change could confuse voters and raised concerns about fluctuating tourism levels in the future.
City financial officials, including City Administrative Officer Matt Szabo and city treasurer Diana Mangioglu, have been exploring various ways to boost general fund revenue. They noted that the cannabis business parity tax would hold unlicensed operators accountable, with projections estimating annual revenue between $60 million and $80 million. However, this figure may decline as illegal businesses are shut down.
Szabo and Mangioglu also recommended a 5% increase in the parking tax, which is expected to generate $67.3 million while encouraging public transport use. The proposed parking tax would align closer to regional rates in nearby cities.
In light of the recent budget challenges, including a nearly $1 billion deficit due to overspending and other factors, the council is considering additional tax measures for the November ballot. Potential measures include a 6% tax on large event tickets, an added fee on rideshare fares, a vacancy tax for unoccupied properties, and a retail delivery fee to help offset infrastructure costs.
Criticism of the city’s tax increase proposals has emerged, particularly from Susan Shelley, vice president of communications for the Howard Jarvis Taxpayers Association. She criticized the council for what she described as reckless financial management, questioning the rationale behind proposed tax hikes while underspending in crucial areas.
Shelley cautioned that increasing hotel and parking taxes could inadvertently reduce city revenue as visitors seek more affordable accommodations in neighboring cities.
