Local Journalism Happens With YouSupport

Mayor Garcetti’s Legacy for LA? Billions in Corporate Tax Cuts.

Billions of dollars have been transferred from the people of LA to its corporations and ruling class in the past two decades, and one person is more responsible than anyone else: outgoing Mayor Eric Garcetti.

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

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

The 2013 race for mayor was heating up, and Garcetti had established himself as the “most ardent supporter” of a proposal to entirely eliminate the city’s gross receipts tax, the main tax levied on corporations by the City of Los Angeles. He was pushing for this even though doing so would cost the public an estimated $400 million in annual revenues — around $75 million more than the entire operating budget of the City of Inglewood.

While Garcetti and his corporate backers didn’t get all of what they wanted, their efforts were not for nothing: in 2015 Garcetti, as mayor of LA, signed into law a 16% tax cut for the white-collar businesses that made up the highest tax bracket. Law firms, financial services companies, and other similar businesses saw their taxes go down, as the people of LA lost $45 million per year. 

This was not Garcetti’s first rodeo. As a fresh face in City Hall in the early 2000s, before his hair showed any hint of gray, he had led a previous — and, by the numbers, even more successful — charge for major cuts to the gross receipts tax, costing the city $100 million per year

This is the kind of recent history that is too easily forgotten: in the past two decades, LA’s politicians have steadily slashed corporate taxes, effectively transferring to the largest corporations billions of dollars that could have otherwise been put toward making life better for people in a city where tens of thousands are unhoused and one-fourth of children (over 200,000) live in poverty

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

While Garcetti is rightly being lambasted for knowingly ignoring sexual harassment by his top aide, Rick Jacobs, the mayor’s pro-corporate austerity has also done real, lasting damage to the residents of Los Angeles. 

Before Garcetti jets off to India, let’s take a look at this history, and understand that these tax cuts as a core part of his legacy.

A Young Garcetti Makes His Mark

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

These cuts were the result of a three-pronged campaign: Garcetti and fellow councilmember Wendy Greuel led an inside game, the LA Times functioned as a mouthpiece for the business community, and LA’s various corporate lobbying organizations provided the overall direction and outside pressure.  

After years of laying the groundwork, their big push came in mid-2004, with the 2005 mayoral elections looming. In April, Garcetti and Greuel formally proposed a 25% across-the-board tax cut for corporations that do business in LA. By June, Mayor James Hahn was feeling enough pressure to support a total exemption from the business tax for small businesses that earn under $100,000 per year.

“We demand tax reform this year,” Mel Kohn, a powerful Valley businessman, told the LA Times. Kohn and other capitalists were not satisfied with the idea of just cutting taxes for small businesses. The paper did not interview anyone who opposed the tax cuts.

In September, the LA Times gave the corporate lobby a platform from which to announce an October 31 deadline for Los Angeles to “reform the city’s byzantine tax system for businesses” (the reporter’s words). By that point, Antonia Villaraigosa, Hahn’s main competitor, signed onto the Greuel-Garcetti proposal to cut all corporate taxes by 25%. Hahn clearly continued to feel the pressure, endorsing an alternative proposal to cut taxes by 15% instead. 

Eric Garcetti and Wendy Greuel at the 2013 KPCC "AirTalk" LA Mayoral Debate answering a question from the moderator.
Eric Garcetti and Wendy Greuel later ran against each other, and are seen here at the 2013 KPCC ‘AirTalk’ LA Mayoral Debate. (Credit: Neon Tommy | Flickr)

Still, business leaders wanted more, and LA’s widest-read paper was more than happy to amplify their demands. In addition to Mel Kohn, two other business representatives were quoted on the need for tax cuts. The reporter also uncritically repeated and validated claims about businesses leaving LA due to high taxation, without providing any examples or evidence.

In late September, a city analysis stated that the compromise 15% cut, paired with the small-business exemption, would cost the city $95 million per year in lost revenue

Not letting unfortunate facts get in their way, Garcetti and Greuel picked a fight with the city’s Office of Finance in a publicly released letter that the LA Times described as “testy.” The pair claimed — with no evidence — that the package of tax cuts would be revenue-neutral because the economy would grow, and slammed the report as pushing a “bureaucratic perspective” that would prevent “an attractive business climate in the city.”

In November of 2004, Garcetti, Greuel, and LA’s most powerful corporations got their way — City Council unanimously voted for the tax cuts

Ever the ambitious one, Garcetti, after the vote, immediately raised the prospect of cutting the gross receipts tax by an additional 15% once these cuts were fully phased in. 

The LA Times, meanwhile, continued to play its role. In its story on the vote, the paper 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.

Just like that, the young Eric Garcetti helped engineer a transfer of wealth of $95 million per year from the people of LA to the city’s corporations.

Garcetti Continues His Righteous Struggle for Big Business

Five years later, Garcetti was at it again, just like he promised. His efforts paid off with another massive corporate tax cut in 2015, along with a few smaller ones along the way.  

In 2009, during the depths of recession, Garcetti — now city council president — resurrected the Business Tax Advisory Committee (BTAC), a nine-member body of corporate representatives that was crucial in pushing for the 2004 cuts. In his first letter to the group, he bragged about delivering $100 million in annual tax breaks, and asked that they examine possibilities for further reductions in taxes, in addition to the complete elimination of the gross receipts tax. 

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

In justifying the latter measure, Garcetti told NBC News that 1,000 internet-based firms had left LA because of high taxes. Knock LA found no evidence to support this claim. 

In 2011, the BTAC released a report recommending — in a move surprising absolutely nobody — that the city completely eliminate the gross receipts tax. Garcetti was supportive, telling the LA Business Journal that “Los Angeles cannot continue to be the most expensive city in the region when it comes to business taxes.”

By 2012, Garcetti was running for mayor and blaming this “job-killing tax” for the city’s economic woes. LA Downtown News described him as the “most ardent supporter” of eliminating corporate taxes entirely, even though doing so would cost the people $400 million per year, according to a city-funded report.

Through 2014 and into 2015, Garcetti, by that time the mayor, was still pushing for a complete elimination of the gross receipts tax, prompting even the LA Times Editorial Board to publish an opinion piece encouraging 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 cautioned that completely eliminating it would “blow a gaping hole in the city budget.” The Editorial Board even mocked Garcetti’s trickle-down, Reaganomics-esque idea that the tax cut would pay for itself by growing the economy so much that tax revenues would actually increase: “where have we heard that one before?”

Nonetheless, Garcetti and the corporate community had many of their demands met in February of 2015, when he signed a 16% tax cut for white-collar businesses — law firms, banks, etc— grouped into the top tax bracket. Their rate would decrease from $5.07 per $1,000 to $4.25 by 2018, costing the city $45 million in annual revenue

Corporations in LA have truly been blessed to have Garcetti looking out for them. 

LA’s Own Ronald Reagan

How many people could 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 see go to the rich?

In 2018, San Francisco voters passed Proposition C, which raises taxes on the 400-or-so biggest corporations in the city and provides about $300 million each year for homeless services and housing. While SF is hardly a paragon of redistributive politics, this provides a useful contrast to what’s happened in Los Angeles. 

Elites like Garcetti would love for us to think that their decisions to cut corporate taxes and overfund the police have nothing to do with the suffering that exists alongside the millionaires and billionaires of this city. But these decisions are precisely what fuel such glaring inequality.

And let’s not miss the racial aspects of Garcetti’s actions: austerity is not race-neutral, as the water crisis in Flint, Michigan, dramatically shows. As LA refuses to spend money on helping poor people, it’s not the white families living in big homes on the Westside and in the Valley who suffer. Black Lives Matter–LA has shown us that government budgets create and reproduce structural white supremacy.

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