EDITORIAL MISPLACED PRIORITIES CITY HALL EMPHASIZES TAX ENFORCEMENT OVER TAX REFORM.

DESPERATE to scrape up more money for its ravaged treasury, City Hall sent out some 151,000 letters to Los Angeles residents last month, warning that they may be in violation of the city's convoluted tax laws.

Only after the letters had been sent, and thousands of Angelenos - many of whom had no idea they were a ``business,'' and many others who aren't - were intimidated, the City Council instructed bureaucrats to spend the next 30 days contemplating revisions to the L.A. tax code.

Now, what does this tell us about the priorities in L.A. City Hall?

Clearly city leaders are more interested in beefing up revenues than in making L.A. a business-friendly environment, the sort of place that creates good jobs and opportunities for its residents.

To be sure, L.A. has no shortage of business-tax scofflaws, cheaters who take advantage of an incomprehensible system and a disordered bureaucracy to skirt the law.

But countless others don't pay city taxes because they're unaware of their obligation, they can't make sense of the arcane code, or the payments that City Hall demands - on top of state and federal income taxes - are too much to bear.

For many smaller businesses operating in L.A. it's the city's historic failure to enforce its tax laws that keeps them in business. With the Department of Finance finally cracking down - during a time of economic slowdown, no less - they might need to set up shop elsewhere or close their doors altogether.

The city's tax structure is a job-killer. With its 64 categories, eight rate schedules applied to every $1,000 in gross revenue and voluminous paperwork, it has driven mom-and-pop shops and corporate giants alike out of L.A. and into the surrounding suburbs. By taxing revenues and not profits, the code is especially destructive to businesses operating on a tight margin.

The best thing City Hall could do to get L.A. businesses into compliance would be to drastically simplify the code and lessen the overall tax burden as soon as possible.

Better yet, scrap the municipal business tax altogether. The revenue would be largely recouped through increased sales and property taxes as more businesses come back to L.A.

But that's long-term thinking, and city leaders are more interested in a short-term cash infusion. That's why tax enforcement has rated a higher priority than tax reform, which is slowly working its way through the interminable bureaucratic process, where it has long languished.

Even from a practical standpoint, it makes more sense to overhaul the tax code before demanding that businesses comply with it. Now, if businesses come into compliance and the code is eventually reworked, companies will scarcely have time to master one set of rules before another takes effect.

Talk about putting the cart before the horse.

City Hall has chosen the worst possible moment to put the screws on local businesses. All the while, it takes its happy time with much-needed reform.

City leaders should demonstrate the same interest in improving the economic vitality of all of Los Angeles as they've shown in cracking down on the little guy - once again.