CITY BUSINESS TAX ATTACKED VICA LEADERS SAY L.A. DRIVING JOBS AWAY.

Byline: Rick Orlov Staff Writer

A major San Fernando Valley business group called on Wednesday for a new round of tax reforms to make Los Angeles friendlier to business by eliminating the gross-receipts tax that raises $300 million a year for the city treasury.

Leaders of the Valley Industry and Commerce Association said the tax - which divides businesses into 64 categories and then charges them eight different rates, up to $5.91 per $1,000 of gross receipts - gives an unfair advantage to neighboring cities.

``Burbank, Glendale, San Fernando, Santa Clarita - cities all just over the border from Los Angeles - are able to attract businesses because of the (higher) cost of operating in Los Angeles,'' VICA President Fred Gaines said.

``What we want the city to do is look at alternatives that are more fair to business and allow us to stay in the city. This is all about job, jobs, jobs.''

Marvin Selter, a past president of VICA who has complained about the gross-receipts tax for years, noted that it is levied without regard to whether a business is turning a profit.

``Even with the income tax, there are deductions you can take to show what you make,'' Selter said.

Councilwoman Janice Hahn said she will introduce a proposal to have the issue studied and is already convinced the tax should be eliminated.

``It is one of the most unfair taxes on the books, and I think it sends a message out that the city is unfriendly to business,'' she said.

Mayor James Hahn, who signed six tax-relief measures almost immediately after being sworn in last year, is open to the proposal, said Jonathan Kevles, who heads his business team.

``The mayor is very concerned about making the city business-friendly and would like to see what the impact on this would be,'' Kevles said.

Larry Kosmont, who produces an annual guide on the cost of doing business in various cities, said such an approach is overdue.

For doing business, ``Los Angeles is the second most expensive city in the state, after San Francisco,'' Kosmont said.

``There have been some reforms in Los Angeles because of (former Mayor) Richard Riordan, but they don't go quite far enough. And, when you're in a recession, like we are now, it is all about cost. A business will look at the bottom line, at the cost of rent and low taxes.''

Kosmont said owners of many firms would willingly pay some city business taxes to do business in Los Angeles, but at a lower rate.

``There is also the prospect that the city will find greater compliance with taxes if they are lower,'' Kosmont said.

City officials have estimated that one-third of businesses fail to pay any city business taxes. The rate of noncompliance was the impetus behind state legislation enacted this year to permit the state Board of Equalization to provide Los Angeles officials with identities of all firms doing business inside city limits.

Selter, however, said forcefully gaining full compliance could take years and require some city spending, while eliminating the gross-receipts tax could be done within several months.

City officials could consider alternative taxes, such as those based on the number of employees or the space a business has, Gaines said.

``We don't favor any one alternative,'' Gaines said. ``We just want the city to look at different options.''

Also, he said, the San Fernando Valley secession drive has nothing to do with the proposal the organization is making.

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SOURCE: City of Los Angeles