Citizens Panel Urges Sweeping Reform of L.A. Business Taxes

In an effort to attract more jobs to Los Angeles, a citizens committee Monday proposed a sweeping reform of the city’s business taxes.

Members of the task force, which was formed by city officials last year, said Los Angeles is “losing big money” because its tax system is “unduly complicated and expensive.”

“Our business tax drives businesses, including some of the larger Fortune 500 companies, into other jurisdictions,” said tax attorney John F. Walker Jr., the committee’s vice chairman and a Los Angeles Chamber of Commerce board member.

The committee’s 10-page report--titled Blueprint for Business Tax Reform--criticizes what it calls “70 years of haphazard tax legislating” by the city.

“The flaws in the business tax system are deep and well known,” according to the report. The flaws “breed aggressive noncompliance.”

For example, the city collects about $300 million annually from businesses that comply with the municipal tax, but is losing about $60 million a year from firms that don’t pay what they owe, officials estimate.

“Our awkward and porous tax system breeds a general disrespect for the authority that administers the system,” the panel found. “This must be reversed if we want our city to hold together and to thrive.”

The 19-member panel proposed a number of fixes aimed at simplifying the system and bringing the one-third of companies that don’t pay the business tax into compliance.

Some of the reforms include:

* Hiring an outside economist to review tax rates.

* Creating an ombudsman to help small businesses navigate the system.

* Expanding the city’s Tax and Permit Division to better identify firms that have not paid their taxes.

* Scheduling an amnesty in 2001 for delinquent businesses.

“Based on the most recent amnesty in 1995, we expect a well-run amnesty program will produce at least $20 million in one-time revenues, plus an annual addition of $5 million,” according to the report.

Councilman Mike Feuer, chairman of the City Council’s Ad Hoc Committee on Tax Reform, said the council already is looking at implementing many of the recommendations.

“This is all about one word: jobs,” Feuer said. “We need to make it easier in Los Angeles for businesses to do business. That will encourage companies to locate and stay here, and give us the long-term job growth we need to continue our prosperity.”

The committee, which includes members appointed by Mayor Richard Riordan and each of the 15 council members, was formed in 1999 as an offshoot of the mayor’s business tax reform efforts. The group includes lawyers, accountants, taxpayer advocates and a variety of other business representatives.

“We think that this is a real opportunity to bring equity to the business tax system and at the same time provide relief,” said Deputy Mayor Rocky Delgadillo, who serves as the mayor’s representative on economic issues.

“There is a fervent cry out there--especially from small businesses--who are saying, ‘This doesn’t work for us.’ This report provides us with a long-range view. It is an evolutionary process.”