Business Taxes Ripe for Reform

Now that the Los Angeles City Council has done the right thing on charter reform, it should go for two in a row by placing another important item, business tax reform, on the June ballot.

The city’s business tax code system is not quite as convoluted as the existing city charter, but darned close. Right now, there are 64 tax categories, from a gross receipts tax on restaurants to a flat tax on bowling alleys.

Several thousand companies fall into multiple categories. Some small businesses pay more than large firms. The system is so muddied that it encourages noncompliance and underreporting of revenues. One conservative estimate has the city losing $75 million annually in uncollected taxes.

Worse, Los Angeles is unable to compete with surrounding jurisdictions and other cities that have far less daunting tax codes. Los Angeles loses businesses and fails to attract new companies.

Of three reform proposals before the council, one stands out and ought to be put before the voters. It’s a compromise between Mayor Richard Riordan and City Councilmen Mike Feuer and Richard Alatorre.

Their joint plan would simplify the tax codes, offer tax relief to businesses, give breaks to small businesses and start-up companies and encourage compliance with the tax laws. This is the one ballot-ready proposal before the council. The other two alternatives, both produced by Councilwoman Jackie Goldberg, generate more questions than answers. The council should approve the Riordan-Alatorre-Feuer plan and let the votes decide on its merits come June.