Tax Plan, With $16.2-Million Cut for Firms, Goes to Council

In an attempt to break a logjam over one of Mayor Richard Riordan’s top priorities, a compromise tax reform plan will be presented to City Council members today.

The latest plan proposes to cut overall business taxes by $16.2 million a year with the possibility of greater tax breaks for some companies, including those that move into Los Angeles.

The compromise, reached over the last several days by Riordan’s office and the staffs of Councilmen Richard Alatorre and Mike Feuer, makes several changes in the mayor’s initial proposal, which would have cut business taxes by $23 million.

Simplifying and reforming the 1930s tax code is a main priority of the Riordan administration, but some council members have raised strong criticisms; Feuer and Councilwoman Jackie Goldberg offered plans of their own.

Goldberg plans to hold a news conference today to announce another alternative that she says will have “no losers,” meaning that no business would pay a tax increase. Because it does not call for tax increases, Goldberg’s new plan would not need to be placed on the ballot, giving the council and the mayor’s office more time to draft another, more substantial tax reform plan, she said.

But the compromise plan, which was approved Wednesday afternoon by Alatorre, Feuer and Riordan, is expected to win enough votes in the council to move the whole package to voters in June, its supporters said.

Among the key items in the compromise plan:

* Tax rate categories--the current code has 64--would be cut to eight with new rates ranging from $1.18 to $5.50 per $100 of revenue.

* A 6% overall reduction in taxes for about two-thirds of the businesses in the city. About a third would see a tax increase or no change.

* A commitment that a business tax advisory group and the City Council will consider additional tax relief for biomedical and biotechnical businesses, wholesale trade (durable goods) companies; manufacturing and computer industries, as well as such creative workers as writers, artists, directors and musicians. Incentives also could be increased for businesses that move into the city.

* A 2003 sunset clause on the package so that taxes may not be raised to close a city budget shortfall without a vote.

* A filing tax for all businesses of $25, instead of the $20 under Riordan’s proposal.

* A first-year start-up exemption for businesses earning up to $500,000 in gross receipts aimed at attracting new companies to the city.

The compromise plan also creates a tax amnesty program and continues the tax exemption for such industries as stevedoring, railroads, gas and electricity.

It has about 63% winners and 37% losers, Feuer said.

“I am optimistic that this plan will garner the support of the council,” Feuer said. “It’s been a very arduous team effort to get to this point.”

Riordan has said he expected his tax reform plan to be “tweaked” by the council before lawmakers voted to put the package on the June ballot.

“The important thing is that it builds on the mayor’s proposal, which calls for fundamental changes in the city’s 75-year-old tax structure,” said Deputy Mayor Noelia Rodriguez. “It’s not a departure from his plan at all.

“It is our hope and expectation that this is the plan that makes it to the ballot,” Rodriguez said. “This is the type of proposal that the taxpayers deserve.”