Sales of expensive purchases could fall as much as 3.9 percent if the proposed increase goes through, according to Beacon Economics, though the overall sales drop would be closer to 1.3 percent. The City Council asked Beacon to assess the impact of the sales tax going from 8.75 percent to 9.25 percent. The extra tax revenue could help pare down the city's deficit. Interestingly, business groups have not taken a position on the proposal, which is being pushed by Council President Herb Wesson. The council votes Tuesday on whether to put the measure on the ballot next March. From the LAT:
Jordan Levine, an economist with Beacon, said that for the city, the benefits from the increased taxes would outweigh any harm to L.A.'s economy. But his firm also suggested that a tax hike could create a "border city problem," with consumers turning to adjacent communities with major shopping destinations and lower tax rates. Those cities include Pasadena, Glendale and Burbank, all of which border L.A. Los Angeles "must consider the possibility that if consumer spending is quite high in neighboring municipalities ... consumers near those neighboring municipalities may choose to go outside of the city to spend," the report said.