COUNCIL OKS CUTS IN BUSINESS TAXES L.A. STILL COSTLIER THAN NEIGHBORS.

Byline: James Nash Staff Writer

More than a decade after city officials first proposed reducing business taxes in Los Angeles, the City Council unanimously approved a package of reforms that will gradually cut the tax burden by as much as 15 percent.

The immediate beneficiaries will be individuals and business with less than $50,000 in annual receipts. They will pay no tax and beginning Jan. 1, the city will eliminate taxes on uncollected debts and begin consolidating dozens of categories of businesses into seven. Businesses with less than $100,000 in annual revenue would be exempted beginning in the 2006 tax year.

In 2006, the tax rates that make Los Angeles the 11th-most-expensive city in America to do business will start to be cut by as much as 4 percent a year, up to a maximum of 15 percent over five years.

``It's as important for the symbolic value as it is for the economic impact,'' said George Kieffer, chairman of the board of the Los Angeles Area Chamber of Commerce. ``These things feed on one another. Los Angeles has the reputation of being business-unfriendly and this begins to turn that around.''

Even with the lightened tax load, Los Angeles will continue to eclipse many of its neighbors - such as Glendale, Burbank, Calabasas and El Segundo - in overall taxes on business. The city has lagged behind many of its competitors both locally and nationally in attracting large companies, with only three Fortune 500 companies within city limits.

Councilwoman Wendy Greuel, who championed business tax relief, cautioned against complacency after the tax cuts begin to take effect next year. She said businesses are clamoring for more tax relief and streamlining of municipal regulations.

``This is the end of the beginning,'' Greuel said. ``We have a lot more to do.''

Business taxes bring in about $385 million a year, accounting for 7 percent of city revenues.

Many city officials said they were reluctant to part with the money, noting that it funds city services such as police, parks and street repair. As part of a compromise, the council agreed to phase in the tax relief - up to 4 percent a year, but less than that if revenues don't increase as expected.

Some advocates of tax reform privately expressed worry that the council would balk at adopting the reform package over concerns about the impact on city revenues. Before the vote, more the a dozen business leaders held a press conference in City Hall to rally support for the reforms.

``I was never sure we would see what we are doing today,'' said Mel Kohn of the Valley Industry and Commerce Association, who has been involved in the process from the start. ``Today is an important day and we are sending an important message to businesses throughout the city.''

Councilman Bernard Parks, the chairman of the budget committee, has cautioned against lifting taxes to a degree that would hurt the city coffers. But on Wednesday, he joined 12 other council members in a unanimous vote for the package.

``I've said all along that it's important to have business tax reform,'' Parks said. ``It's also important to protect the city's revenues.''

Some business leaders said even the modest reforms achieved this year resulted only from a concerted push by business leaders, reform-minded politicians and city labor unions, all of whom joined business in embracing tax relief. Kohn noted that had the council acted more quickly, Los Angeles might be reaping the rewards of more job creation and a healthier local economy already.

But at the end of the council's vote, more than 20 business leaders stood in the audience and delivered a standing ovation. Several hugged City Council members who had urged the reforms. Others high-fived one another.

``This is a culture change,'' said a jubilant Jack Walker, a retired tax attorney and co-chairman of a committee spearheading reform efforts. ``It's just a different world. There will be a tax reform culture in the city of Los Angeles and hopefully also a business reform culture.''

Representatives of the entertainment industry in particular applauded the reforms, which will cut taxes on small- and medium-size film production companies and reclassify thousands of creative artists from businesses to independent contractors, reducing their taxes.

In a written statement, a coalition of entertainment industry unions said the reforms would help stem the flow of entertainment-related businesses from Los Angeles to cheaper locales.

``The council's unanimous vote in favor of reforming the business tax ordinance will provide meaningful tax relief and equity for thousands of men and women working in the entertainment industry as well as for businesses throughout the city,'' the coalition said in a statement.

It was signed by the Writers Guild of America, west; Screen Actors Guild; Directors Guild of America; American Federation of Television and Radio Artists; Professional Musicians, Local 47, American Federation of Musicians; Art Directors Guild, International Alliance of Theatrical Stage Employees, Local 800; Association of Independent Commercial Producers; Affiliated Property Craftpersons, Local 44, IATSE; Recording Musicians Association of Los Angeles; and the Film Musicians Secondary Market Fund.

Staff Writer Rick Orlov contributed to this report.

James Nash, [phone]

james.nash(at)dailynews.com

BUSINESS AND TAX REFORM

The City Council passed a tax-reform package Wednesday that includes the following provisions:

--Eliminates taxes on businesses with gross annual receipts of $100,000 or less and grants other businesses a 15 percent reduction, phased in beginning in 2006.

--Eliminates tax on bad debt - money that has been billed but not collected.

--Allows businesses that do not keep their books on an accrual basis to pay the tax in cash.

--Consolidates 75 business categories into seven for tax purposes.

--Reassigns several industries that have been wrongly assigned the highest tax rate.

--Grants relief to small- and medium-size film production companies.

--Exempts writers, directors, actors, musicians and craft workers below certain income levels from the business tax.

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