Los Angeles Business Tax Break Proposed

Los Angeles' mayor today proposed an expansion of the City of Los Angeles' new business tax exemption, from two to three years, assuming gross revenues of less than $500,000:

Tax Break for New Businesses Proposed, Los Angeles Business Journal, June 15, 2010

Hilton Hotels Leaves Beverly Hills, California To Lower Its Cost of Doing Business

Hilton Hotels Corp., which last month announced it was leaving Beverly Hills, said Wednesday it had chosen Fairfax County, [Virginia], as its new corporate home.

Hilton, which wants to lower its cost of doing business .... [intends to] create more than 300 full-time jobs in Fairfax County within the next 36 months.

Hilton Selects D.C. Suburb for New Home, Los Angeles Business Journal, February 4, 2009

See also: California Scheming and Some Californians Flee State for Greener Pastures

Study: Los Angeles, Santa Monica Among 10 Most Expensive Places to Do Business in United States

And predicted to get worse. Westlake Village rated most business friendly in Los Angeles County. The Daily News reports:

The city of Los Angeles will finish 2008 in familiar company: Among the 10 most expensive places in the country to do business, according to a study released today.

Santa Monica is also on the list compiled by the 14th annual Kosmont-Rose Institute Cost of Doing Business Survey released by the Rose Institute of State & Local Government at Claremont McKenna College.

Los Angeles' placement on the list has remained steady, but at least it hasn't gotten any worse in the past year, according to Larry Kosmont, the survey's founder and president and chief executive officer of Kosmont Companies.

"Cities that charge the highest license fees such as Los Angeles, Philadelphia, and Cincinnati are often those that have a history of uneven relations with the business community," Kosmont said.

But Robert "Bud" Ovrom, Los Angeles' deputy mayor of economic development and housing, said the city is making progress.

For example, next year the city starts the final phase of a five-year plan to reduce the business tax by 15 percent. The final installment, a 3.9 percent reduction, kicks in Jan. 1.

"When I'm talking to companies I almost never hear about business taxes. I don't even hear much about workers' comp," Ovrom said.

"Everything I hear today is (about) the quality of the work force, schools, traffic and affordable housing." ....

On the contrary, the author's clients are more concerned with the high costs of state business taxes,* local business taxes, regulation, and workers' comp. Perhaps Ovrom's conversations are primarily with larger companies...? The article continues:

Los Angeles is challenging for businesses because of its fee and tax structure, it said. And while California cities are more competitive than in the past few years, costs for businesses remain high.

It also noted that Los Angeles County continues to be one of the nation's most expensive places for business and 10 of its cities are among the 50 most costly. The Bay Area is pricey, too.

The situation will worsen next year, Kosmont said, as voter-approved tax and fee increases kick in.

"What is happening in California is the cities are going to the ballot box and winning tax increases," Kosmont said. "Some of these cities were Los Angeles County cities. That makes a bad climate even worse."

Kosmont said that California and many of its cities have been expensive for a long time, but some have tried to compensate with aggressive economic development and redevelopment programs.

But now all are struggling with the state's budget deficit, which is the largest in its history.

The survey compares 402 cities nationwide based on the array of taxes and fees each imposes. They include sales, utility, income, property, and business taxes....

It noted that the highest-cost cities, such as Santa Monica and Oakland, cluster around the aging urban cores, while newer bedroom communities in the outer suburbs charge developers for their growth and pass on the savings to businesses to stimulate their economies.

For example, Kosmont said the least costly city in the county is Westlake Village.

"It has no business tax, no utility tax and very low property taxes.

So it is one of the bargains," Kosmont said.

That's by design, said City Manager Raymond B. Taylor.

"We have strived to be one of the most business-friendly cities in California since our inception in 1981," Taylor said.

About 8,800 people live in the city that abuts the Ventura County line. But there are 850 businesses in the village that generate 11,000 jobs.

"The city recognizes the value and the role that businesses play in terms of job development and the vibrancy of the community," Taylor said.

* A domestic corporation in Utah costs a minimum of $100 in annual franchise tax payable to the state for the privilege of doing business as a corporation in the state; in California, $800, among the highest cost in the nation.

See also:

California Legislature Plans To Increase Taxes

2009 California Employer Payroll Tax Rates