Explaining Southern California's economy

It's time to say goodbye to the LA business tax

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Los Angeles Mayor Antonio Villaraigosa.

KPCC's Brian Watt reported recently that LA Mayor Antonio Villaraigosa wants to extend the city's business tax holiday "indefinitely." Which could be interpreted as the mayor saying that he wants to get rid of the business tax altogether — rather than simply extend the holiday for another four years, as some city council members have suggested. (Currently, new businesses are exempted for three years.)

LA is facing a budget deficit, of around $250 million, which sounds like a lot but isn't really that bad, given the dreadful nature of the economy. Meanwhile, the business tax is expected to bring in something like $425-$440 million this fiscal year. That sounds pretty good, but the complaint is that LA's business taxes are so high that they actually cost the city money, in terms of lost revenue from other taxes that would flow from increased business activity.