In a bid to repair the city's image as a place unfriendly to business, Los Angeles Mayor Antonio Villaraigosa is calling on the City Council to enact a 10 percent cut in the city business tax rates as part of a reform effort.
The reform program would also include raising tax exemption thresholds for small and startup businesses.
"For macro-economic reasons beyond our control, the business climate has gotten significantly worse," Villaraigosa said in a July 27 letter to the Council that was released Wednesday. "Accordingly, I encourage the City Council to bring forward a new generation of business tax reforms, focused on the unique problems we face today and building upon the reforms undertaken in 2004."
The 2004 reforms included a 15 percent reduction in business tax rates and higher exemption levels for new and small businesses.
In the July 27 letter, Villaraigosa suggested the council consider reducing the gross receipts tax by an additional 10 percent. He also called on the council to raise the small business exemption threshold from the current $100,000 to "an amount that will have an immediate impact," and to have that threshold rise each year based on the inflation rate.
Villaraigosa also requested that the council consider increasing the maximum gross receipts amount to qualify for a new business exemption; that threshold is now $500,000 for businesses that have operated for less than two years.
"This exemption can be a critical tool used to attract new businesses to Los Angeles and help start-up companies take hold in rough economic times," he said.
Villaraigosa's move comes after an outcry from local business groups and technology companies over the city's decision to put several multimedia companies into higher business tax categories. Most of the companies had previously classified themselves into a technology category to claim a tax break enacted by former Mayor Richard Riordan. City auditors claimed some of those classifications weren't justified and have moved those companies into the city's highest business tax bracket.
But the city itself reclassified one media company, Creators Syndicate, into a higher business tax category retroactive to 2004, prompting company founder and president Rick Newcombe to file suit and write a column in the Wall Street Journal decrying the city's move.
Villaraigosa sent a letter last week to Office of Finance director Antoinette Christovale requesting that her office submit a measure to the council that bars the city from reclassifying and collecting back taxes from businesses.
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