'HIGHER TAXES' MERELY AN ANTI-SECESSION MYTH.

Byline: Joel Fox Local View

BEWARE of tax increases, say Los Angeles city officials to San Fernando Valley voters who want to create a new Valley city. It's a scare tactic, but it's really city officials who are frightened.

Why? Because they're afraid to do what's necessary to create a more efficient government.

City officials have complained that if the Valley gains its independence, taking about half the city's territory and approximately one-third of its population, the city can't possibly cut its bloated budget. The hungry bureaucracy monster must be fed.

Proof lies in the well-known history of the city's bureaucratic missteps as well as in a number of audits that the city controller has released this past year showing waste in city government.

If the Valley secedes from Los Angeles, the old city will have to compete with the new city.

Undoubtedly, the new Valley council will undo the arcane business tax codes under which Los Angeles now operates. That means Los Angeles officials will be forced to lower business taxes, something they seem loath to do.

The Los Angeles Area Chamber of Commerce cites the city's taxes and regulations, particularly the gross receipts tax, as a major obstacle in businesses locating in the city.

According to the respected Kosmont Cost of Doing Business Survey, Los Angeles is one of the most expensive places to do business because of its taxes.

The city's gross receipts tax has a maze of categories in which to fit different businesses. A business can pay as much as $5.91 per $1,000 on its gross receipts.

In contrast, the Kosmont study shows that the city of San Diego has a much simpler tax system whose equivalent business tax per $1,000 of gross income is 6 cents.

The high gross-receipts tax and regulations on retail sales translates into fewer dollars for the city treasury. This was confirmed by a study by the Rose Institute of State and Local Government at Claremont McKenna College.

The study's author, Dr. Steven Frates, observed that Los Angeles has been less successful than most of its neighboring cities in bringing in sales tax revenues.

The cost of doing business in Los Angeles is passed on to customers, making it less expensive to buy in other locations.

City officials have talked about changing the business-tax codes for a long time. And talked and talked and talked.

With the competition of a new Valley City those business taxes will be cut and Los Angeles will be better for it - keeping businesses, bringing new business into the city and raising revenue.

But it's not lower taxes and government efficiency that some in the city of Los Angeles want. It's piles of new tax money.

USC professor Erwin Chemerinsky, a strong voice for keeping Los Angeles together, wrote in an article that the problem with Los Angeles is that taxpayers don't pay enough. He called for changing or eliminating Proposition 13 so the politicians and bureaucrats can dig deeper into taxpayers' pockets.

In a recent debate, L.A. City Councilman Eric Garcetti mused that if the Valley breaks away from the city, officials might have to consider a commuter tax to capture revenue from those who live outside Los Angeles but do business downtown.

This kind of thinking got Los Angeles the reputation for being business unfriendly. Impose such a tax and watch employees pressure their bosses to flee the city.

A Valley city with a reformed business tax code could benefit greatly from such a plan. Businesses will rush to the Valley.

The state agency that oversaw the reorganization plan for the San Fernando Valley city says the new city will be financially viable on its own. It will have enough revenue to meet its service needs, have a growing reserve, and will get even fiscally stronger as the city of Los Angeles is weaned off the money it has historically been taking out of the Valley without returning services.

As more Valley tax dollars stay in the Valley, the new city government can increase services or lower taxes.

Under state constitutional provisions, taxes can't go up in the new city unless the voters agree to increase them.

The scare tactic of increased taxes in the new city is political myth.