This Wednesday, the Ad-Hoc Committee on Business Tax Reform will meet for the first time to begin the formal process of phasing in reform of the gross receipts tax once and for all. This committee, chaired by L.A. City Councilmember Paul Krekorian and Vice-Chair Eric Garcetti, will build on the work done by the Business Tax Advisory Commission (BTAC) and lay out a plan for a reduction of the tax known as one of the greatest barriers to doing business in the city of Los Angeles.
Los Angeles has the highest gross receipts tax rate in L.A. County and one of the highest in the nation. The tax structure was put in place decades ago before the Internet was invented and employers were less mobile. In today's 21st century economy, the companies that are in the City's highest gross receipts tax bracket are the most mobile and the easiest to move to another city or state. A three-phase plan put forward by BTAC and approved by the City Council's Jobs & Business Development Committee last summer would halve the tax currently paid by the highest tax classification after five years.
In the height of an election season, one thing all the candidates have agreed on is that the foundation of creating a more welcoming business environment begins with the reduction and elimination of the gross receipts tax. They recognize that when a company chooses a home in which to start their business or an existing business looks to expand and possibly relocate, perception matters.
A more business-friendly Los Angeles can look forward to a broader property tax and sales tax base, and additional revenues from permits, licenses and fees. The new jobs for L.A. residents and the new money that these businesses will invest back into their neighborhoods will make this strategic decision a very smart move for the community.
With the close of football season, I’d like to offer one last metaphor in thanking BTAC and Council President Herb Wesson for getting us into the red zone, close to the touchdown. I urge you to reach out to your councilmember to show your support for the adoption of the first phase of the reduction of the gross receipts tax in the City of Los Angeles. Together, we can score and win.
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