Mayor Garcetti’s major corporate tax cuts have cost Angelenos billions

Eric Garcetti (center) poses with the two former mayors, Antonio Villaraigosa (right) and Jim Hahn (left), at his inauguration in 2013 in front of City Hall stairs covered in blue carpet.
Eric Garcetti (center) poses with the two former mayors, Antonio Villaraigosa (right) and James Hahn (left), at his inauguration in 2013. (Credit: Eric Garcetti | Flickr)

“Our economy is shrinking and we’re losing jobs, and it’s because of this job-killing tax,” Councilman Eric Garcetti proclaimed.

The mayoral race in 2013 was getting hotter, and Garcetti had established himself as the “most ardent supporter” of a proposal to completely eliminate the city’s gross income tax, the most important tax imposed on businesses by the City of Los Angeles. He pushed for this, even though it would cost the public an estimated $ 400 million in annual revenue – about $ 75 million more than the entire operating budget of the city of Inglewood.

Although Garcetti and the backers of his companies did not get everything they wanted, their efforts were not in vain: in 2015, Garcetti, as mayor of LA, signed a 16% tax cut for the law firms that made up the law. highest tax bracket. Law firms, financial services firms and other similar firms saw their taxes fall as the people of LA lost $ 45 million a year.

This was not Garcetti’s first rodeo. As a fresh face at City Hall in the early 2000s, before his hair showed something gray, he had led an earlier – and in numbers even more successful – charge for large cuts in gross income tax, costing the city $ 100 million a year. .

This is the kind of recent story that is all too easily forgotten: For the past two decades, LA politicians have steadily cut corporate taxes and, in effect, transferred billions of dollars to the largest corporations that could otherwise have been used to make life better for people. in a city where tens of thousands are homeless and a quarter of children (over 200,000) live in poverty.

Of course, there were various forces at work pushing for these tax cuts, as well as the broader capitalist system where those who have the money have the power. But it is also true that the one person who is undoubtedly most to blame is our outgoing mayor, Eric Garcetti.

While Garcetti is rightly denounced for deliberately ignoring sexual harassment by his top assistant, Rick Jacobs, the mayor’s pro-corporate savings have also done real, lasting harm to Los Angeles residents.

Before Garcetti flies to India, let’s take a look at this story and understand that these tax breaks are a central part of his legacy.

A young Garcetti makes his mark

Garcetti, who was first elected to LA City Council in 2001, quickly made a name for himself by spearheading a wave of major corporate tax cuts in 2004.

These cuts were the result of a three-pronged campaign: Garcetti and another councilor, Wendy Greuel, led an inside game, LA Times acted as a mouthpiece for business, and LA’s various corporate lobby organizations stood for the overall direction and pressure from outside.

After years of laying the groundwork, their major push came in mid-2004, when the 2005 mayoral election was imminent. In April, Garcetti and Greuel formally proposed a general tax cut of 25% for companies doing business in LA. In June, Mayor James Hahn felt enough pressure to support a total corporate tax exemption for small businesses earning less than $ 100,000 a year.

“We are demanding tax reform this year,” said Mel Kohn, a powerful businessman in the Valley LA Times. Kohn and other capitalists were not happy with the idea of ​​just cutting taxes for small businesses. The newspaper did not interview anyone who was against the tax cuts.

In September became LA Times gave the corporate lobby a platform from which to announce a Oct. 31 deadline for Los Angeles to “reform the city’s Byzantine corporate tax system” (the reporter’s words). At the time, Antonia Villaraigosa, Hahn’s biggest competitor, signed the Greuel-Garcetti proposal to reduce all corporate taxes by 25%. Hahn clearly continued to feel the pressure and supported an alternative proposal to lower taxes by 15% instead.

Eric Garcetti and Wendy Greuel at the 2013 KPCC "AirTalk" LA Mayor's Debate answers a question from the chairman.
Eric Garcetti and Wendy Greuel later ran against each other and are seen here at the 2013 KPCC’s AirTalk‘LA mayoral debate. (Credit: Neon Tommy | Flickr)

Still, business leaders wanted more, and LA’s most read newspaper was more than happy to reinforce their demands. In addition to Mel Kohn, two other business representatives were quoted on the need for tax breaks. The reporter also repeated and validated uncritical claims about companies leaving LA due to high taxation, without giving examples or evidence.

In late September, an urban analysis determined that the 15% compromise cut, paired with the small business exemption, would cost the city $ 95 million a year in lost revenue.

When Garcetti and Greuel did not let unfortunate facts get in the way, Garcetti and Greuel took up a fight with the city’s finance office in a publicly released letter, which LA Times described as “testy”. The couple claimed – without evidence – that the package of tax cuts would be revenue-neutral because the economy would grow, and slammed the report which pushed a “bureaucratic perspective” that would prevent “an attractive business climate in the city.”

In November 2004, Garcetti, Greuel and LA’s most powerful companies got their wish – the City Council voted unanimously in favor of the tax cuts.

The ever-ambitious Garcetti, after the vote, immediately raised the prospect of lowering gross income tax by a further 15% once these cuts were fully phased in.

That LA Times, in the meantime, continued to play its role. In its history of the vote, the newspaper quoted six separate business owners or representatives as well as the mayor and several council members, all of whom expressed positive opinions about the news. Not a single dissenting opinion was quoted, despite the fact that these cuts would starve the city of billions of dollars over the next two decades.

Similarly, young Eric Garcetti helped make a $ 95 million a year transfer of wealth from the people of LA to the city’s corporations.

Garcetti continues its fair fight for big business

Five years later, Garcetti was back in business, just as he had promised. His efforts paid off with yet another massive corporate tax cut in 2015 along with a few minor ones along the way.

In 2009, during the recession, Garcetti – now chairman of the city council – revived the Business Tax Advisory Committee (BTAC), a body of nine members of business representatives that was instrumental in pushing for the cuts in 2004. In his first letter to the group, he boasted to provide $ 100 million in annual tax breaks and asked them to explore the possibility of further tax cuts in addition to the complete abolition of the gross income tax.

When the committee began work, Garcetti a year later spearheaded two significant corporate tax cuts. The first was a “tax holiday” that allowed new businesses to be exempt from gross income taxes for their first three years. The second was a major cut for Internet-based businesses, which would see their tax rate reduced from the highest rate of $ 5.07 per share. $ 1,000 of gross revenue (or 0.5%) to just $ 1.01 (or 0.1%).

As justification for the latter measure, Garcetti told NBC News that 1,000 Internet-based companies had left LA due to high taxes. Knock LA found no evidence to support this claim.

In 2011, BTAC released a report that recommended – in a move that surprised absolutely no one – that the city completely remove the gross income tax. Garcetti was supportive and told LA Business Journal that “Los Angeles can not continue to be the most expensive city in the region when it comes to business taxes.”

In 2012, Garcetti ran for mayor, blaming this “job-killing treasure” for the city’s financial problems. LA Downtown News described him as the “most ardent supporter” of eliminating corporation taxes altogether, even though it would cost the people $ 400 million a year, according to a city-funded report.

Throughout 2014 and into 2015, Garcetti, at the time the mayor, was still pushing for a complete abolition of the gross income tax, which led to even LA Times The editors will publish an opinion piece urging him to slow down.

While agreeing with “everyone” (read: the business lobby) that the tax – “a parasite”, “poorly designed” and “uncompetitive” – ​​should be reduced, they warned that complete elimination of it would “blow up a gaping hole in the city budget. ” The editors even mocked Garcetti’s trickle-down, Reaganomics-like idea that the tax cut would pay for itself by making the economy grow so much that tax revenues would actually increase: “where have we heard it before?”

Nevertheless, Garcetti and the business community met many of their requirements in February 2015, when he signed a 16% tax cut for salaried companies – law firms, banks, etc. – grouped in the top tax framework. Their rate would drop from $ 5.07 per. $ 1,000 to $ 4.25 in 2018, which cost the city $ 45 million in annual revenue.

Companies in LA have been truly blessed to have Garcetti look after them.

LA’s own Ronald Reagan

How many people can be safely and decently housed with this money? How many hungry children could we feed with the billions of dollars that Eric Garcetti would prefer to go to the rich?

In 2018, San Francisco voters passed Proposition C, which raises taxes on the city’s approximately 400 largest businesses and provides about $ 300 million annually for homeless services and housing. While SF is hardly a role model for redistributive politics, this provides a useful contrast to what has happened in Los Angeles.

Elites like Garcetti would love that we thought their decisions to lower corporate taxes and overfinance the police have nothing to do with the suffering that exists with the millionaires and billionaires of this city. But it is precisely these decisions that fuel such blatant inequality.

And let’s not miss the racial aspects of Garcetti’s actions: austerity is not race-neutral, as the Flint, Michigan water crisis dramatically shows. Since LA refuses to spend money on helping poor people, it is not the white families living in large homes on the west side and in the valley who are suffering. Black Lives Matter-LA has shown us that public budgets create and reproduce structural white supremacy.

Pro-corporate austerity and upward redistribution of wealth have had devastating effects on the people of LA. Eric Garcetti will never be a Joe Biden, or even Pete Buttigieg, but he will always be our Ronald Reagan.

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