Businesses in Los Angeles will pay lower taxes starting in 2016, with the City Council agreeing Tuesday to reduce the city’s gross receipts tax rate.
The council voted 14-0 to gradually reduce the maximum tax rate from $5.07 per $1,000 of gross receipts to $4.75 by January 2016, $4.50 by January 2017 and $4.25 by January 2018.
The ordinance requires the signature of Mayor Eric Garcetti, who has been pushing for the business tax to be phased out.
Council members said the move is the first step toward phasing out the gross receipts tax, which many other cities do not impose.
Councilman Joe Buscaino said businesses faced with a choice between Los Angeles and surrounding cities may be swayed by the amount of municipal taxes they will be required to pay.
“Why set up shop in Los Angeles if you know you’ll be paying higher business taxes than if you’d opened up headquarters in Torrance, Gardena or Long Beach?” Buscaino said.
Councilman Mike Bonin said the reduced tax rate puts the city on the path to completely eliminating the gross receipts tax “in a prudent way … so we’re not hitting our revenue all at once.”
With Garcetti and other city leaders pushing to increasing the minimum wage in Los Angeles, business groups have been pressuring the city to reduce the cost of doing business, including asking the city to get rid of its gross receipts tax.
Los Angeles Area Chamber of Commerce President Gary Toebben said the gross receipts tax reduction approved today “is less aggressive than the plan recommended” by a city panel in 2010, which proposed gradually eliminating the tax over 15 years, but said it is “a step in the right direction.”
“The chamber thanks Mayor Garcetti and the members of the City Council for taking this first step toward lowering this onerous and threatening tax on businesses who want to grow revenue and jobs in the city of L.A.,” Toebben said.
— City News Service
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