Staff Reporter

A new business tax proposal by Mayor Richard Riordan, part of the long-delayed tax equity study, now includes a $20 million tax cut that could mean a 7 percent tax reduction for most businesses.

Previous versions of the plan, in the works for about two years, would have focused more on simplifying the system and involved only minor cuts in business taxes.

The proposal would reduce the number of tax categories from the current 64 to eight and eliminate multiple categories for individual businesses. Officials with the mayor's office say that the changes along with a possible one-time tax amnesty might prompt more businesses to pay their taxes. That would help lessen the impact of the cuts on the city's general fund.

Current estimates are that up to 30 percent of all businesses in L.A. pay no business gross receipts tax, or pay less than they should.

"The tax relief will be significant and the simplification will make it a more business-friendly system," said Rocky Delgadillo, deputy mayor for economic development. "We believe that when it is released, the tax-equity proposal will be viewed so positively by the business community that it could even bring business-people out to vote."

The tax equity proposal has been tied up for months as the city has tried to collect data and run computer models to figure out how city revenues would be affected by changes in the tax system. Also, previous proposals met with only lukewarm reception from the business community, as they did not contain significant tax cuts.

The delays in preparing the proposal mean it probably will not be ready in time to win City Council approval to put it on the April 1999 ballot. It would most likely appear on the June 1999 runoff ballot, which typically has a lower voter turnout.

The fact that some companies will actually see a tax increase is the reason the measure must be placed on the ballot. Proposition 218, passed in 1996, dictates that any tax increase must be approved by the voters.

Delgadillo would not release details on how big the tax cut would be. However, Beverly Burr, the economic consultant who is running many of the computer models for the proposal, said the city is "playing with about $20 million in tax relief." If that figure sticks during the next few weeks of fine-tuning, it would represent a 6.7 percent cut in total business tax revenues, which are estimated at about $300 million for the current fiscal year.

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