TAX NEWS - June 2010

Los Angeles Tax: Tax relief - Here's how Los Angeles can lose its anti-business reputation

Get rid of the business tax.

From the announcements out of City Hall last week, one might think the City of Angels was retooling itself as the City of Enterprise. The City Council approved a recommendation by the newly reconstituted Business Tax Advisory Committee to give a three-year business tax holiday to new businesses that come to Los Angeles.

Meanwhile the Department of Water and Power, under the operations of former bigwig banker Austin Beutner, announced it had created rate discounts for new businesses - and a special "SWAT team" to get them hooked up and opening their doors as quickly as possible.

Mayor Antonio Villaraigosa touted the program as evidence that his Business Czar Beutner was having a profound effect on business policy. But if this is what qualifies as "aggressive strategy," this city is in big trouble.

While these are positive steps toward repairing Los Angeles' legitimately acquired reputation as a business-busting municipality, they are small ones that don't take the city very far down the path of economic recovery. These new programs don't address myriad policies that make the city a nightmare for small companies; they only reward the large, politically connected business players.

Indeed, this is just another lopsided program that rewards opportunistic companies but penalizes the ones that have stuck it out here in Los Angeles despite the obvious advantages of moving to a low- or no-tax city.

A tax holiday and a utility SWAT team - whose job it is to simply provide good service - might create a few jobs within the city, but they are little more than gimmicks. They won't change the overall atmosphere that has long contributed to the anti-business climates. If the denizens of City Hall really want to shake things up in the business world and send a message that Los Angeles is committed to building an environment that will attract and retain the entrepreneurs and start-up businesses, they must take bigger, bolder steps. Or even just one big step.

Here's a recommendation that's both simple and fair: A business tax holiday for everyone. Permanently.

That would send a very strong message to business that L.A. is serious about rebuilding its economy.

Even with recent cuts and this tax holiday, Los Angeles still has the highest business tax rate in the county - and one of the highest in the nation. Some cities, such as neighboring Glendale, charge no business tax at all.

And what does a business get for the extra cost of operating inside the L.A. city limits? They get a city whose infrastructure is crumbling from lack of public investment, schools so bad that the district has no choice but to turn them over to outside operators, gangs and drugs infesting the only affordable neighborhoods, and a municipal bureaucracy that's both incomprehensible and capricious.

Expedited utility hookup isn't much of an incentive for a business to move from gentle Glendale or placid Pasadena.

Villaraigosa and the City Council have already failed to enact reforms that could improve the city's business climate. A streamlined permitting process for developers stalled. The city has sent mixed messages to businesses around LAX - creating an enterprise zone around the airport to attract new companies, while passing a living wage ordinance for hotels in the area. And the city still won't crack down on illegal venders who steal revenue from legitimate stores that pay taxes.

Mayor Villaraigosa and City Council: If you really want to attract and retain business in L.A., don't waste another year on temporary measures and gimmicks.

Get rid of the business tax.