Let's Wave Goodbye to the Gross Receipts Tax and Hello to New Jobs
|August 7, 2012|
|The No. 1 tax complaint of businesses in Los Angeles is the gross receipts tax. Statements like "overly burdensome" and "complicated and confusing" are part of every conversation. While the City has enviable assets that represent the foundation for the return to a booming economy, businesses cite the gross receipts tax structure as one of the top reasons for locating or expanding elsewhere.|
The City of 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 when employers were less mobile. In today's 21st Century economy, companies that pay the tax at the highest rate are the most mobile and the easiest to locate outside the city limits or in another state.
A group of taxpayers and concerned citizens (BTAC – Business Tax Advisory Committee) was appointed by the City Council to study the gross receipts tax two years ago. Their research indicates that the burden of a high gross receipts tax, coupled with a complicated classification structure, is hindering job growth and economic expansion. The advisory committee recommended a 15-year phase out of the tax in three five-year phases. The first phase would consolidate the City's nine tax classes into three and reduce the top rate from .507 percent to .255 percent over five years.
While the City is likely to see a short-term loss of revenue from this reform, a more business-friendly Los Angeles can look forward to future increases in the 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 the community will make this strategic decision a very smart move for the community.
The business community understands that this change to the City’s revenue structure must be implemented in a balanced, responsible way. Thus we support the report's recommendation for a 15-year phase out of the tax coupled with an annual review of direct and indirect revenue gains and trigger mechanisms.
The BTAC recommendations, which were approved by the City Council’s Jobs & Business Development Committee, will soon be headed to the full Council. We urge you to contact your Councilmember and make it clear that this decisive act by the City Council is the economic stimulus that our businesses, unemployed workers and city coffers are looking for.
Phasing out the gross receipts tax in the City of Los Angeles would be a huge step forward and a strong statement that Los Angeles is strongly committed to attracting and retaining jobs, businesses and a growing tax base in the future.
And that's The Business Perspective.
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