LA considers waiving part of local sales tax for Palisades Fire victims rebuilding homes

As Los Angeles homeowners grapple with the expense of rebuilding after last year’s devastating fires, an L.A. City Councilmember is putting forward an idea that could lower some costs.

Councilmember Traci Park, who represents the Pacific Palisades, has introduced a motion to explore waiving part of the city’s portion of the local sales tax for fire victims who purchase rebuilding materials in the city.

The 1% of the local 9.75% sales tax that goes into the city’s general fund would be given back to consumers under the proposal. The waiver could apply to lumber, appliances and other rebuilding goods purchased within the city.

The motion, introduced Friday by Park and seconded by Councilmember John Lee, says: “The City should do everything within its power to alleviate the financial burden for these residents and businesses in order to facilitate their return and stabilize the Pacific Palisades community.”

Would it make much of a difference? 

Economists told LAist the proposal could help many homeowners mitigate the high cost of rebuilding, but likely wouldn’t tip the scales for under-insured, under-resourced property owners.

“It wouldn't hurt if it's very well designed and easy to use,” said Alexander Meeks, a director at the Santa Monica-based Milken Institute. “But I'm not sure if it's really going to tackle the scale of the financial challenge that survivors are facing.”

Meeks noted that the tax waiver wouldn’t lower up-front costs such as environmental testing, architectural design and permitting. And it may not help homeowners sourcing raw materials from outside the city.

Zhiyun Li, a UCLA Anderson School of Management economist, said the waiver could help some homeowners justify the additional cost of rebuilding more fire-safe structures.

“Homeowners must typically pay out of pocket to upgrade to IBHS+ standards, which are more stringent,” Li said. “The tax waiver could encourage upgrading to IBHS+ standards or investing more in mitigation, thereby reducing future risk and improving the likelihood of maintaining insurance coverage.”

What’s next for the proposal? 

The proposed tax relief would not be available to properties that have been sold since the fires started in January 2025.

The motion has been sent to the City Council’s budget and fire recovery committees. If approved by the full council, it would require the city administrative officer, the Office of Finance and the city attorney to report back to the council within 60 days on options for crafting a tax relief plan.

The motion calls for the report to consider factors such as how to minimize the burden of administering the tax relief, what documentation homeowners would have to submit and what it would cost the city to oversee the program.