LA City Council waives taxes for new businesses

Joe Raedle/Getty Images

Paying cash

Businesses are getting a big tax break to locate in Los Angeles. The L.A. City Council today unanimously approved waving the gross receipts tax for new businesses.

Los Angeles taxes the gross income of businesses, not just profits. Some business leaders complain that L.A.'s tax policies are an obstacle to business and job growth. The "tax holiday" applies to new businesses, and will last for three years.

L.A. City Council President Eric Garcetti said the vote to waive the gross receipts tax was unanimous.

"This tax holiday will allow businesses that are starting out in Los Angeles to get on their feet," Garcetti said.

"We are going to waive 100 percent of their gross receipts or business tax, and allow them to create jobs right here in Los Angeles where we need in the midst of this recession to put people back to work."

Los Angeles is already hundreds of millions of dollars in the red. Critics say this is the wrong time to cut taxes. Garcetti said it is the right thing to do.

"If we chase businesses away, we will have even less money, more layoffs, fewer city services. Now is the time for us to be ambitious about bringing jobs back to Los Angeles, and this is a great way to do it," said Garcetti.

The ordinance will expire on Dec. 31, 2012. After that date, new businesses that open in Los Angeles will qualify for the city's gross receipts tax exemption only if they gross less than $500,000 a year. Also, the tax break will be shortened to two years.

KPCC wire services contributed to this report.