The Los Angeles City Council moved forward Tuesday with three tax increase proposals that could generate more than $260 million annually, targeting hotels, parking facilities, and unlicensed cannabis businesses. The measures are set for placement on the June 2026 primary ballot, marking the city’s latest push to shore up a general fund facing structural deficits.

City Administrative Officer Matt Szabo presented the proposals to the Budget and Finance Committee on January 20, 2026, warning that traditional revenue sources are eroding faster than expenditures. The council will now instruct the City Attorney’s Office to draft ballot language for voter consideration.

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Hotel Tax Hike Targets Olympics and Super Bowl Tourism

The most significant revenue generator would raise the transient occupancy tax—commonly called the hotel tax—from its current 14% to 16%. The increase would apply to hotel and motel rooms, short-term rentals, and hostels across Los Angeles.

The proposal includes codifying taxes on online travel companies’ markups, a change city officials project will generate $45.3 million in additional annual revenue. Currently, Los Angeles charges 14% on the total paid for lodging, including all fees and charges. Neighboring cities Malibu, Santa Monica, and Beverly Hills already charge 15%.

A temporary 2% supplementary charge would take effect from January 2027 through December 2028, pushing the total rate to 18% during the 2027 Super Bowl and 2028 Olympics. This surcharge alone would generate an estimated $89.3 million over the two-year period.

Hotels with 50 or more rooms would face an additional 2% assessment from the Los Angeles Tourism Marketing District, bringing their effective rate to 20%.

“This proposal creates a cost spiral,” said Laura Lee Blake of the Asian American Hotel Owners Association. “As fees stack up, Los Angeles risks becoming the most expensive option in a competitive market.”

Parking Tax Increase Aims to Boost Transit Use

The second measure would increase the parking occupancy tax from 10% to 15%, a 50% rate hike that officials project will generate $67.3 million annually. The tax applies to all paid parking except residential parking and public parking meters.

City officials argue the increase would incentivize more residents and visitors to use public transportation or other alternatives. The proposed 15% rate would fall between Burbank’s 12% and Santa Monica’s 18%. Pasadena, Glendale, and Long Beach do not impose similar parking taxes.

The Los Angeles Parking Association opposes the increase, stating it “would hurt consumers and the city’s economy” and urging the city to focus instead on collecting from current scofflaws.

The Building Owners and Managers Association of Greater Los Angeles warned the hike would raise costs for tenants and visitors, potentially hindering leasing efforts and return-to-office initiatives. “Layering multiple taxes risks slowing economic recovery and discouraging investment,” the group said in a statement.

Cannabis Tax Closes Enforcement Loophole

The third proposal would establish a cannabis business parity tax, amending the tax code to ensure unlicensed marijuana businesses face the same tax liability as licensed operators. The Los Angeles Office of Finance said the measure would close a regulatory loophole.

Officials project the tax would generate between $60 million and $80 million annually, though revenue would likely diminish over time as enforcement actions close illegal businesses. Licensed cannabis operators have long complained that unlicensed competitors gain an unfair advantage by avoiding taxes and regulations.

The tax proposals come as Los Angeles confronts what Szabo described as eroding traditional revenue sources that cannot keep pace with growing expenditure obligations. “The City must consider permanent options, and specifically new taxes,” he told the committee.

The council recently approved hiring 410 additional police officers, bringing the LAPD to approximately 8,555 total officers, adding to budget pressures. Meanwhile, the city’s sales tax already stands at 9.75%, with a legal maximum of 10.75%, leaving limited room for increases there.

The Budget and Finance Committee rejected a proposed half-cent sales tax increase that could have generated more than $300 million annually. Committee members cited competition from other ballot measures, including proposals from firefighter and parks unions, plus countywide health care and statewide billionaire wealth taxes.

“The thing I hear most in my district is affordability and no new taxes,” said Budget and Finance Chair Katy Yaroslavsky, though she supported exploring the three measures that advanced.

Voter Tax Fatigue Looms Over Ballot Strategy

Los Angeles faces a crowded 2026 ballot that could test voter willingness to approve multiple tax increases. A recent Long Beach poll found 80% of residents oppose tax hikes even for services, signaling what observers call Southern California “tax fatigue.”

Melissa Krantz from Szabo’s office acknowledged the challenge: “We probably have to do a study about the number of measures we put on and how voters might respond to multiple measures.”

The June primary ballot typically sees lower turnout than November general elections, which can benefit tax measures that require simple majority approval. However, the council is also considering four additional tax measures for the November ballot: a 6% tax on tickets for events with 5,000 or more attendees, fees on Uber and Lyft rides, a vacancy tax on empty properties, and a $1 retail delivery fee to offset road wear.

These potential November measures would require separate studies, including up to $100,000 in funding to examine vacancy tax implementation. Yaroslavsky urged staff to move forward with those studies despite the packed ballot.

Commercial Real Estate Industry Pushes Back

The Building Owners and Managers Association has emerged as a vocal opponent, arguing the taxes would compound challenges facing commercial real estate as the sector recovers from pandemic-era vacancies and rising operating costs.

The parking tax increase particularly concerns the industry, as higher costs for tenants and visitors could slow leasing momentum. The potential vacancy tax study also worries property owners who say market-driven vacancies should not face penalties.

“Long-term fiscal stability depends on economic growth and occupancy,” BOMA stated, urging the council to consider how layered taxes might discourage investment in a recovering market.

What Happens Next

Council members will vote on which proposals to advance and instruct the City Attorney’s Office to draft final ballot language. If approved, the measures would appear before voters on June 3, 2026.

Hotel operators and parking facility owners should prepare for potential compliance changes and higher effective rates if the measures pass. Cannabis businesses—both licensed and unlicensed—face increased enforcement and tax liability under the parity measure.

The temporary hotel surcharge would take effect in January 2027, timed to capture revenue from the February 2027 Super Bowl at SoFi Stadium and the July-August 2028 Olympics. After December 2028, the hotel tax would revert to the permanent 16% rate if voters approve the base increase.

For businesses and residents concerned about the proposals, the BOMA Action Center provides resources for engagement, and public comment periods will open once ballot language is drafted.

Source

LA City Council to explore potential tax measures ahead of June election | Eyewitness News