Riordan Business Tax Plan Getting Some Competition

Los Angeles City Councilwoman Jackie Goldberg on Tuesday threw a substantial obstacle in front of Mayor Richard Riordan’s plans to put his business tax reform proposal before voters in June when she presented lawmakers with her own plan for overhauling the commercial tax structure.

Perhaps as a sign that the mayor knows his plan is having trouble in the council committee overseeing tax reform, Riordan showed up in the middle of the lengthy meeting. He sat in the center of the second row to listen as lawmakers debated his proposal.

Although council aides said they believed Riordan’s presence was an indication of concern that his $23-million plan faces trouble, his aides said the mayor merely has tax reform “high on his radar screen.”

“Obviously it’s at a critical juncture here at the City Council,” said Deputy Mayor Jennifer Roth. “It makes sense he would want to show his support for tax reform, which in his mind equals jobs and economic development.”

Only minutes before Riordan’s surprise visit, Goldberg unveiled her proposal which--unlike the mayor’s--would raise tax rates for lawyers, film companies and doctors, while lowering those for most special trade and general building contractors and real estate operators.

Goldberg’s intervention into the tax reform issue is sure to annoy the mayor, who has made business tax reform one of his administration’s priorities.

But Rocky Delgadillo, who heads the mayor’s business team, said he believes the mayor has the support of a majority of council members, and that Goldberg’s proposal would do little to relieve tax rates in the city.

Nonetheless, Goldberg said the mayor’s proposal, which calls for a $23-million tax break, is legally indefensible, arbitrary and unreasonable.

“We think ours is cheaper, more rational, more fair and legally defensible,” Goldberg said in an interview.

Moreover, she said she believes the plan should have a far lesser impact on the budget. The $23-million tax cut is “a gift of public funds,” Goldberg said, adding that her plan calls for a nearly $3-million break.

Under Riordan’s plan, the city’s 1930s-era business tax code would be whittled from 64 tax categories to eight, start-up businesses would be exempt from city taxes in their first year of operation, and companies with less than $5,000 in revenue would have to pay only a $20 filing fee.

Although aides say that Riordan’s plan calls for tax rate reductions in all types of industries, Goldberg and other council members have raised concerns that businesses are being placed in tax categories in an arbitrary fashion.

Council members, including Goldberg, Rita Walters and Mike Feuer, have also complained about the $23-million tax break as the city enters a budget year with a deficit.

When confronted by Walters about that issue, Riordan said: “Sometimes you take some risks in the short run.”

But he also lobbied the council members on the tax amnesty program--in which the city would waive penalties on taxes that have not been reported or underreported over the last three years, but businesses would still be required to pay back taxes and interest.

Councilman Richard Alatorre, who headed the council committee considering the plan, is perhaps the mayor’s most powerful ally on the issue.

Speaking to Goldberg, he said: “This wasn’t done in just some isolated way. It was done over a long period of time with rationale, whether we agree with it or not.”

But Goldberg complained that the plan is being rushed through the council to make the deadlines to place it before voters in June.

“We really should have taken this in committee 20 weeks ago,” Goldberg said. “Really, even what I am proposing isn’t as good as it should be. We just don’t have the time to finesse the various issues.”

Several lobbyists who support the mayor’s tax plan said Goldberg’s wrench into the works makes it even more of an uphill fight in council, which is typically only united in its efforts to defeat the mayor.

“It makes us have to fight against the whole thing,” said one Riordan supporter.

The mayor’s plan, which will need council approval by Feb. 17 to appear on the June ballot, was intended to lighten the load on Los Angeles’ business community. His aides say that companies complain loudly that the city’s burdensome tax structure is a key factor when they consider staying--or leaving--the city.

Goldberg, however, doesn’t buy it.

“There is a study now done by the mayor’s own consultant that says very, very few [businesses] actually make a decision about whether to stay here or move from here is based on the business tax,” she said.