By HOWARD FINE
Staff Reporter
In a push to reduce the burden on L.A. businesses that already pay taxes to the city, the Los Angeles City Council is looking at spreading the pain to businesses that do not pay taxes at present.
The tourism, transportation and utility sectors are all being eyed as potential tax revenue sources. So are businesses located outside the city that do not pay taxes on goods or services they sell in L.A.
Another possible source of revenue would be the live entertainment industry, which could face a tax on admissions to concerts or sporting events.
In a Jan. 13 motion by L.A. City Councilwoman Jackie Goldberg, the council has asked the City Attorney’s office to look into the legality of removing exemptions on certain transportation, tourist and utility businesses.
In addition, Councilman Richard Alatorre, who chairs the Budget and Finance Committee, said he wanted to explore the feasibility of levying receipt-based taxes on businesses that are based outside city limits but sell products or services within the city.
The council specifically asked the city attorney to examine a tax on rental cars.
The motion asks the Milken Institute, which is currently running tax models for the city as part of a tax equity study, to examine possible new taxes on railroad companies, as well as deregulated electric and gas utilities.
The council also wants Milken to look at changing the tax structure for cellular phone and pager use. The current system taxes users with business addresses in the city. Under study will be a system to collect for all air time occurring in the city.
The City Attorney’s office is expected to issue a report on the legality of tapping these additional revenue sources this week, according to Assistant City Attorney Ron Tuller.
The move is part of an attempt by the city to expand its business tax base so that businesses that do pay taxes won’t have to pay as much as they do now. It comes amid plans to revamp and simplify the entire city business tax code following last year’s release of the tax equity study.
“We have to look at every conceivable source of revenue that could expand the pie,” Alatorre said. “To not explore every option to seek additional revenues sources would be an injustice to those that are paying taxes at the present time.”
By far the largest single revenue source would be companies that should be paying business taxes to the city but aren’t. City Clerk Michael Carey estimates that there is roughly $75 million in these uncollected taxes; the total annual business tax revenue is $300 million. To improve collections, the City Clerk’s office is planning to revamp its computer system within the next two years.
But Carey estimated that there is an additional $20 million to $30 million that could be collected from industries or sectors that are currently exempted from city business taxes.
Many of the new taxes under consideration would require changes to state or federal law. There’s also the practical difficulty of trying to find those companies based outside the city that sell within the city.
“There are vast numbers of companies out there that sell products or services within the city that we have no idea about. We sometimes try to monitor advertising, but that only offers a glimpse into some of these operations,” Carey said.
Then, there are the political obstacles. On the tourism front, actions like imposing a rental car access fee or a theme park admissions tax could scare away tourists, said George Kirkland, president of the Los Angeles Convention and Visitors Bureau.
“As a general rule, travel and tourism are heavily taxed. The question is whether or not the additional tax bite is so large that it cuts into tourism,” Kirkland said. “In New York, the hotel and bed tax was raised sky-high, which resulted in a big drop in tourists and a corresponding decline in city revenues.”
Alatorre said there are no plans to increase the hotel and bed tax in Los Angeles, which stands at 14 percent. “We’re not trying to hurt any one industry in our efforts,” he said.
