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Sunday, May 28, 2023

Business Groups Push for More Tax Reform

A group of more than 30 business organizations led by the Valley Industry and Commerce Association has called for the L.A. City Council to renew its efforts at business tax reform by setting up a permanent Ways and Means Committee. Despite landmark legislation last year that eliminated taxes for 60 percent of businesses in the city, provided special protection for the entertainment industry and will eventually cut the tax rate for all businesses by 15 percent over the next five years starting in 2006, business leaders say the city has more work to do before it’s seen as a business friendly location. “It could be easy for it to become ‘out of sight, out of mind,'” said Mel Kohn, former co-chair of the Business Tax Advisory Council. “We’re not going to let that happen again.” The group, Citizens for Business Tax Reform Now, wrote letters to City Council President Alex Padilla and Councilman Tony Cardenas recommending that the council take up a number of ideas pushed by the now-defunct BTAC. “Now is the time to establish one central Ways and Means Committee to provide on-going tax/revenue oversight within the city. This would not be a committee to duplicate the Budget and Finance Committee nor to usurp any power of any other Council standing committee, including the ad hoc Committee on Business Tax Reform,” said the letter to Padilla, signed by Kohn; Rusty Hammer, president of the L.A. Area Chamber of Commerce; and Bonny Herman, president of VICA. “The essential purpose is to create a body to discuss city policies related to tax writing and tax oversight and be aware of the financial and long-term economic impacts of decisions made by council and the Mayor.” David Phelps, director of government relations for VICA, said the city council could do a lot more to help foster successful small businesses without putting a strain on the city’s budget. Reducing the number of tax categories in the city from 60 to five, he said, would be an easy step to take and would make it easier for businesses to understand which forms they need to fill out every year. He said the coalition also wants the city to hire a business to find companies based outside of the city that are doing business in Los Angeles without paying taxes. Helping small businesses “Above all, these reforms will greatly assist the thousands of small businesses that are based in Los Angeles, despite the lure of relocating to neighboring cities, some of which do not levy business taxes at all,” said Phelps in a letter to the coalition’s membership. “With an improved tax system that is easier to comply with, the city can help these small businesses grow and generate new jobs and tax revenues as well as a renewed sense of pride for the Los Angeles business community.” Kohn said that the coalition, which includes groups like the Writer’s Guild of America and the United Chambers of Commerce, never intended to stop pushing for business tax reforms despite the fact that BTAC was no longer in existence. “We basically wanted to wait until after the primaries, with all of these laws taking effect,” Kohn said. “We feel it’s our duty here. We are the watchdog even though there’s no more BTAC.” Kohn, who is a partner with the CPA firm Kirsch, Kohn and Bridge, along with four other accounting firms, volunteered to conduct a study analyzing the viability of implementing further reforms. The tax reform group has been effective at pushing the City Council in the past. In 2004, it set a Halloween deadline for the City Council to pass meaningful reforms. Although the council missed by a few weeks, Kohn said the measure was effective anyway. April 15 deadline The new group has given the council an April 15 deadline to draft an ordinance creating the ways and means committee. Councilmember Wendy Greuel, who co-authored last year’s business tax reform measures with Councilman Eric Garcetti, said she thinks April 15 is a reasonable goal to propose the creation of a permanent ways and means committee. “We’re on board,” said Greuel. “That was something that when I was chair of the committee I suggested and I know that my colleague Councilman Cardenas at least has verbally agreed. We need to continue to focus our efforts in business tax reform on larger issues.” A recent study prepared by Kosmont Cos., an L.A.-based economic development consulting firm, and the Rose Institute of State and Local Government at Claremont McKenna College found in an annual survey of businesses nationwide that even if Los Angeles successfully cuts its base business tax rate by 15 percent, business costs in the city will still be among the highest in the nation. Greuel said the study, which only polled businesses with over $10 million per year in gross receipts, does not accurately portray Los Angeles’ accomplishments, since the Council eliminated business taxes for every company with gross revenues under $100,000 60 percent of the businesses within the city limits. Kohn said that the study, while it may be right in its assessment of Los Angeles’ tax system, cannot examine the impact of Los Angeles as a more welcoming city. “I understand what (Kosmont) is saying, but did he really look beyond today to see the impact of Los Angeles becoming more business friendly?” Kohn said.

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