After more than a decade of false starts by officials, a City Council committee cleared the way Thursday for a comprehensive plan that would cut business taxes in Los Angeles by $95 million a year and create special breaks for the entertainment industry.
Committee members predicted that the full City Council would approve the long-awaited reforms, which eliminate taxes for most companies, before the end of the year, allowing some changes to begin Jan. 1.
"Today is a good day for businesses in the city of Los Angeles," said Councilwoman Wendy Greuel, a member of the council's Ad Hoc Business Tax Reform Committee. "It has been a long time coming. We are saying, 'Los Angeles is open for business. Los Angeles wants your business.' "
Business leaders hailed the vote as a significant milestone, even though some of the changes fall short of the proposals sought by the Los Angeles Area Chamber of Commerce, the Valley Industry and Commerce Assn. and other groups.
"It's big," said Bonny Herman, president of the San Fernando Valley's business association. "I'm very pleased."
The reform package would eliminate the city's business tax on firms earning $100,000 or less, about 61% of companies in Los Angeles, and phase in a 15% cut for all other companies over five years.
Other measures would eliminate business taxes on bad debt and exempt writers, directors and other entertainment industry workers from paying the tax if they make $300,000 or less in gross receipts.
The committee voted 3 to 0 to recommend the reforms, which had the support of a city-appointed Business Tax Advisory Committee.
The reform package would also simplify the city tax code, cutting the existing categories that determine how a business's tax is calculated from 75 to seven. The tax ranges from $1.18 to $5.91 per $1,000 of gross receipts, depending on the business.
Businesses have sought reform for decades, but city budget crises have delayed the effort. When businessman Richard Riordan was elected mayor in 1993, he vowed to reform the tax system.
A study released in 1998 recommended the creation of a citizens business tax advisory committee, which released reports in 2000, 2002 and 2004 that recommended various reforms.
Originally, business groups wanted a 25% tax cut for businesses making more than $100,000 a year, but Herman said 15% appears to be the best City Hall can do.
