---
[ ARCHIVE ](https://mail.citywatchla.com/archive)
# Candidate Garcetti Plays the Numbers Game
January 07 2013
Written by Paul Hatfield.
[](https://www.addtoany.com/share)
PERSPECTIVE - Politicians are always promising new jobs or improved revenues.
All of the candidates for mayor of Los Angeles are in favor of eliminating the business tax on gross receipts as a means of promoting economic development. The tax has already been [eliminated for all new-car sales ](http://www.municipalinsider.com/la-oks-tax-break-for-new-car-dealers/)in the city.
The mayor and City Council believe new-car dealers will be enticed to establish themselves in Los Angeles, leading to an increase in sales tax revenue which will far surpass the lost business tax revenue.
The same outlook holds for a complete elimination of the gross receipts tax for all businesses.
There is no doubt businesses will benefit, but will the city’s revenue from other sources improve enough to offset the loss of 10% of the general fund attributable to the business tax, or about $440 million per year?
Eric Garcetti said the city has lost up to [$60 million per year in ***potential*** sales tax revenue ](http://latimesblogs.latimes.com/lanow/2012/07/la-car-dealerships-city-council.html)due to the exodus of almost 100 dealers over the last 25 years. I saw another projection of [$43 million](http://labusinessjournal.com/news/2012/jul/03/l-approves-business-tax-exemption-new-car-dealers/).
It’s tough to estimate. Garcetti is presenting a theoretical number.
How many of the sales from new or returning dealerships will come at the expense of existing ones located within the city limits? Most consumers have no dealer loyalty. They will buy from whichever one offers the best deal.
Although it is reasonable to assume purchases from new local dealers will detract somewhat from neighboring cities, the auto industry is highly competitive - there are many factors that figure into pricing other than the impact of the gross receipts tax (equal to 0.127% of sales – a fraction of 1%)….and buyers do their homework. There is no telling how other cities will respond to LA’s move, much less how dealers outside our borders will alter marketing and sales strategies.
The estimate is further complicated by where the purchaser lives, because that determines the overall sales tax rate. Also, how quickly can we expect dealers to set up shop in the city, to the extent they do?
One can only imagine how much more complex calculating the benefits of eliminating the business tax across the entire spectrum of products is.
I am glad our city leaders and candidates are considering revamping the tax structure; I am not pleased by how Garcetti, in particular, is presenting it.
The impact is far from a sure thing. The timing of the business tax elimination could crater the general fund if the loss in gross receipts revenue and the additional sales tax are not in sync.
Garcetti makes it sound as if the benefits are immediate and certain. Our city has a history of being too optimistic in its projections. Garcetti is part of that history.
Garcetti, like fellow candidate Wendy Greuel, would rather bank on unsubstantiated revenue claims than face the reality of restructuring the employee compensation programs absorbing 85%-90% of the general fund. But that would mean jeopardizing their public union support.
I hope this issue is a major talking point in the controller’s race, too.
***(Paul Hatfield is a CPA and serves as Treasurer for the Neighborhood Council Valley Village. He blogs at Village to Village, contributes to CityWatch and can be reached at: )*** **–cw**
**CityWatch**
**Vol 11 Issue 3**
**Pub: Jan 8, 2013**
[  ](https://mail.citywatchla.com/component/banners/click/116 "USA Radio Museum - Wide")
[  ](https://mail.citywatchla.com/component/banners/click/107 "LA DWP | Save $4K, Green | Priority Ad")
[  ](https://mail.citywatchla.com/component/banners/click/82 "LA DWP #2 (Power Savers)")
[  ](https://mail.citywatchla.com/component/banners/click/97 "Home - LA DWP #2 (Pay Water Bill Help)")
## Get The News In Your Email Inbox Mondays & Thursdays
Website
[  ](https://mail.citywatchla.com/component/banners/click/110 "Something You Should Know")
---
## Featured CityWatch Stories
[  ](https://mail.citywatchla.com/los-angeles/33727-nithya-raman-won-city-hall-but-is-she-already-failing-the-first-test-of-leadership)
### [Nithya Raman Won City Hall But Is She Already Failing The First Test Of Leadership](https://mail.citywatchla.com/los-angeles/33727-nithya-raman-won-city-hall-but-is-she-already-failing-the-first-test-of-leadership)
THE BOTTOM LINE - Los Angeles voted for change, not another administration consumed by political confrontation while th…
[  ](https://mail.citywatchla.com/voices/33723-how-stephen-miller-destroyed-trumps-second-administration)
### [How Stephen Miller Destroyed Trump’s Second Administration](https://mail.citywatchla.com/voices/33723-how-stephen-miller-destroyed-trumps-second-administration)
THE VIEW FROM HERE - On September 1, 2025, this column explained how the vile, anti-Mexican racist Stephen Miller was d…
[  ](https://mail.citywatchla.com/los-angeles/33704-nithyas-budget-buzz-saw)
### [Nithya’s Budget Buzz Saw](https://mail.citywatchla.com/los-angeles/33704-nithyas-budget-buzz-saw)
LA WATCHDOG - Nithya Raman, our new mayor, will inherit a budget that is a river of red ink. According to the First Fi…
[  ](https://mail.citywatchla.com/los-angeles/33733-congratulations-nithya-raman-as-our-new-olympics-pro-unity-mayor)
### [Congratulations, Nithya Raman, As Our New Olympics, Pro-Unity Mayor!](https://mail.citywatchla.com/los-angeles/33733-congratulations-nithya-raman-as-our-new-olympics-pro-unity-mayor)
ALPERN AT LARGE - The uncertainty is OVER. We now know who will be our next Mayor, and we need a Leader, and a Uniter…
[  ](https://mail.citywatchla.com/los-angeles/33726-can-raman-restore-and-repair-los-angeles-ten-challenges-that-face-the-la-mayor-elect)
### [Can Raman Restore and Repair Los Angeles? Ten Challenges That Face the LA Mayor-elect](https://mail.citywatchla.com/los-angeles/33726-can-raman-restore-and-repair-los-angeles-ten-challenges-that-face-the-la-mayor-elect)
WESTSIDE - Fresh off an impressive grass roots victory over Karen Bass, the first mayoral incumbent since James Hahn to…
---
## [ ARCHIVE ](https://mail.citywatchla.com/archive)
[  ](https://mail.citywatchla.com/archive/15339-early-intervention-and-jobs-are-key-to-stemming-chronic-homelessness-in-los-angeles)### [Early Intervention and Jobs are Key to Stemming Chronic Homelessness in Los Angeles](https://mail.citywatchla.com/archive/15339-early-intervention-and-jobs-are-key-to-stemming-chronic-homelessness-in-los-angeles)
### [Tucker Carlson and Gay Rightwinger Blame California Wildfires On Hiring LGBTQ People](https://mail.citywatchla.com/archive/18755-tucker-carlson-and-gay-rightwinger-blame-california-wildfires-on-hiring-lgbtq-people)
### [Anti-LGBTQ Veep Just Can’t Stop Talking about Mayor Pete](https://mail.citywatchla.com/archive/17690-anti-lgbtq-veep-just-can-t-stop-talking-about-mayor-pete)
[  ](https://mail.citywatchla.com/archive/15316-news-pulse-corrupt-system-reason-for-not-voting-in-2018-majority-wants-more-than-two-parties)### [NEWS PULSE: ‘Corrupt System’ Reason for Not Voting in 2018 … Majority Wants More Than Two Parties](https://mail.citywatchla.com/archive/15316-news-pulse-corrupt-system-reason-for-not-voting-in-2018-majority-wants-more-than-two-parties)
[  ](https://mail.citywatchla.com/archive/10245-dead-dog-set-on-fire-sparks-fears-for-strays-in-los-angeles)### [Dead Dog Set on Fire … Sparks Fears for Strays in Los Angeles](https://mail.citywatchla.com/archive/10245-dead-dog-set-on-fire-sparks-fears-for-strays-in-los-angeles)