Los Angeles:
Taxes, Fees and Scams

Jul 28, 2008

The Los Angeles Metropolitan Transportation Authority (MTA) Board voted to put a half-cent sales-tax increase on the ballot in November. They say the tax will last for 30 years and will generate between 30 and 40 billion dollars. Supposedly, the money will be used to fund the construction of new mass transportation lines, as well as some highway improvements. At least that’s what they say.

No doubt, L.A. needs enormous improvements to its transportation system. L.A. traffic consistently ranks as the most awful in the country. And it is getting worse, with traffic delays doubling over the last 25 years.

But why are voters being asked to pay for yet another sales-tax hike? The sales tax already went up by a half-cent in 1980, and another half-cent in 1990. People are still paying those increases! If the new tax goes through, the sales tax will be the highest in the state, 8.75%.

Since the sales tax is extremely regressive, the burden falls disproportionately on the working class and poor. With all the high prices these days, the new tax will be like pouring salt on the wound!

Besides that, there is no way to know if the tax money will be used the way the MTA and the mayor say. When they try to “sell” a new tax, they make it seem like the money will go directly to the new projects.

Since the MTA never provides adequate financing for all its operations and capital improvements, it is always being forced to borrow more money. Currently, the MTA’s debt is almost four billion dollars. And it’s only going to increase with the new round of projects, especially since the final price tag for construction is always much higher than the original estimate.

That means more and more of the budget goes to pay back the loans. According to a 1998 report in the Los Angeles Times, the MTA spends 30% of its budget on “servicing” its debt, including interest and principal. So, wealthy investors and financial companies pocket almost one-third of the entire MTA budget, before any money is spent on operations and construction!

This whole mess doesn’t have to fall on our shoulders. We could fix it by taxing the corporations! The same Wall Street companies that make a profit off the MTA and our taxes should be paying for these projects in the first place. In the last 30 years, the tax burden in California has increasingly shifted to the workers and poor people.

But for corporations, tax breaks are a way of life! Don’t believe anyone who says that California is a “high-tax” state that drives out big business. It’s a myth! A couple of years ago a study found that some of the biggest companies like Walt Disney and Fluor, the big engineering company, paid no state corporate income tax beyond the $800 minimum. In 2007-2008, 12 billion dollars in corporate handouts could have been used to pay for transportation and other services we need.

Instead, the politicians make sure that their buddies and business partners reap all the benefits and pay as little as possible.

And they’ll keep on doing it until working people call them out.