LOS ANGELES, Calif. /California Newswire/ — Speaking to the United Chamber of Commerce Annual Mayor’s Luncheon in Woodland Hills, Mayor Antonio Villaraigosa said for the first time on Tuesday that the three-year tax holiday on new businesses that he implemented in 2010 should never expire. The policy is currently set to expire in 2012.
“The business tax holiday is a proven tool for bringing businesses to Los Angeles and generating jobs,” said Mayor Villaraigosa. “So today, for the first time, I am calling on the City Council to make the three year tax holiday for new businesses permanent. There should be no expiration date on this common-sense, job-creating policy.”
In 2010, Mayor Villaraigosa led the successful fight for the new Business Tax Holiday. Under the Business Tax Holiday, which was authored by Councilmember Richard Alarcon and former Councilmember Greig Smith, businesses are exempted from the City’s business tax for the first three years that the business operates in Los Angeles.
This holiday provides them with the opportunity to establish a solid foundation for economic success.
The business tax holiday has proven to be a powerful incentive. Job creating companies like Google, BYD, Beverly Hills BMW, Costco, Farmer’s Insurance, Lucky Brand, Target, Blackline Software, Tom’s Shoes, Gensler, Coda, and Telscape Communications have relocated to Los Angeles in part because of the holiday.
Councilmember Mitch Englander, Council President Eric Garcetti, and Councilmember Tom LaBonge have recently called for extending the three-year tax holiday for new businesses until 2015.
Mayor Villaraigosa wants the City to go one step further. He wants to make the three-year tax holiday for new businesses permanent and will work with the City Council to make that happen.
LA’s business tax, which was put in place before Mayor Villaraigosa took office, is a gross receipt tax which means it is a top line tax that does not take into account profits. If you have two companies both with revenue of $1 million but one has $900,000 in profits and the other $100,000 in profits they would both pay the same amount. LA’s business tax has nine classifications that range from 1.01 per $1,000 of gross receipt to 5.07 per $1,000. Our 5.07 is highest in the region and is seen as a disincentive for doing business in Los Angeles. Several cities in the region including Glendale, Calabasas, and Santa Clarita have no gross receipt business tax, making LA a tough sell to businesses looking to start up or relocate.
“I support a fiscally responsible approach to the elimination of the business tax. I am committed to creating a healthy environment for job creation in Los Angeles while maintaining the City services businesses rely on and further reducing our City’s structural deficit.
“A recent study shows the immediate, complete elimination of the tax will cost the City hundreds of millions of dollars during the worst economy of our generation. I encourage the Council to take an aggressive and thoughtful approach to increase economic development and economic stability for the City. The Business Tax Holiday has done just that by incentivizing job creators to move to Los Angeles without impacting our City budget,” Mayor Villaraigosa added.
Reforming LA’s business tax is a core component of the five-part job-creation strategy that Mayor Villaraigosa has been pursuing. The five parts are: (1) reforming LA’s business tax; (2) reducing red tape; (3) partnering for economic growth; (4) modernizing LAX and the Port of Los Angeles; and (5) building a 21st century transportation network. The underlying message of Mayor Villaraigosa’s job-creation strategy is that Los Angeles is not waiting for Washington to create jobs. The City is taking five steps right now to put people back to work.