Los Angeles Proposes New Taxes to Address Budget Deficit and Preserve Core Services

As the City of Los Angeles prepares to host a series of high-profile international events—including the 2026 FIFA World Cup, the 2027 Super Bowl, and the 2028 Olympic and Paralympic Games—city leaders are advancing a package of tax proposals aimed at closing a growing structural gap between revenues and expenditures.

The City Council’s Budget and Finance Committee has recommended placing several revenue measures on the June 2, 2026 Primary Nominating Election ballot, positioning them as necessary steps to stabilize the City’s finances and protect essential services ahead of an unusually demanding fiscal period.

Why New Revenue Is Being Considered

City budget officials describe Los Angeles’ fiscal outlook as increasingly constrained, driven by persistent operating deficits and long-term shifts in the local economy. Key pressures include:

• Erosion of Traditional Revenue Sources: Core revenue streams are no longer keeping pace with costs. Sales tax collections have weakened as consumer spending shifts from brick-and-mortar retail to online transactions that often benefit other jurisdictions, while utility user tax revenues continue to decline as residents abandon landline services.

• Escalating and Unavoidable Costs: Expenditures related to liability claims, homelessness response, and disaster recovery have risen sharply. Spending on homelessness interventions alone has increased at an average annual rate of 39 percent since 2016. Recent emergency response and recovery efforts, including those related to the Palisades fire, have further strained the General Fund.

• Mega-Event Obligations: While global events bring temporary economic activity, City officials caution that associated tax revenue spikes rarely cover the full cost of security, transportation, public safety staffing, and infrastructure upgrades required to host them.

Absent permanent new revenue sources, the City Administrative Officer (CAO) has warned that Los Angeles will struggle to fully fund its operating budget or make necessary long-term investments.

The June 2026 Ballot Proposals

The Budget and Finance Committee has advanced three revenue measures for voter consideration:

1. Transient Occupancy Tax (TOT) Increase
   The tax on hotel stays would rise from a total rate of 14 percent to 16 percent on a permanent basis, with a temporary surcharge raising the rate to 18 percent during designated “Mega Events” through December 2028.

   • Closing Collection Gaps: The measure would clarify that online travel company service fees and markups are taxable and require short-term rental platforms to collect and remit TOT directly to the City.

   • Estimated Revenue: $45 million to $89 million annually.

2. Parking Occupancy Tax (POT) Increase
   The tax applied to paid parking would increase from 10 percent to 15 percent.

   • Estimated Revenue: Approximately $67 million annually.

3. Cannabis Business Tax Parity
   Currently, unlicensed cannabis businesses are effectively exempt from the City’s gross receipts tax because they operate outside the permitting system. This proposal would impose the same tax obligations on unlicensed operators as licensed businesses, closing what City officials describe as a loophole that incentivizes illegal activity.

   • Estimated Revenue: Roughly $70 million annually.

Notably, the Committee declined to advance a proposed increase to the City’s Transaction and Use (sales) Tax—from 9.75 percent to 10.25 percent—which had been projected to generate approximately $327 million per year.

Intended Use of Funds

All three measures are designed to support the General Fund, giving the City maximum flexibility to respond to budgetary pressures rather than locking revenue into narrowly defined programs.

City reports emphasize that unrestricted revenue is critical during periods of fiscal volatility. The funds are intended to:

• Avoid Service Reductions: Prevent cuts to police, fire, sanitation, and other core services.

• Support Infrastructure and Event Readiness: Repair aging infrastructure and prepare City systems for increased demand during upcoming international events.

• Sustain Homelessness Programs: Provide more stable funding for homelessness services, which currently rely on temporary or piecemeal revenue sources.

Looking Ahead—and Pushback

City officials are also evaluating additional revenue options for the November 2026 ballot or future elections, including a potential “Major Event Tax” on tickets, a “Vacancy Tax” on unused properties, and a “Retail Delivery Fee” on goods deliveries.

Industry opposition is already emerging. The Los Angeles Parking Association has warned that higher parking taxes could undermine Downtown Los Angeles’ economic recovery and deter visitors and workers. Meanwhile, the Asian American Hotel Owners Association has raised concerns that increasing hotel taxes—alongside rising minimum wages—could make Los Angeles less competitive for conventions and tourism compared to nearby jurisdictions.

The City Council must adopt final resolutions and ordinances placing these measures on the June ballot by February 11, 2026.