Business & Economy

Villaraigosa to sign ordinance reducing taxes for Internet businesses

Mayor Antonio Villaraigosa was poised to sign a new ordinance today that would reduce the taxes that the city collects from Internet-based businesses.

Many of those businesses had threatened to move out of Los Angeles after the city switched them from the lowest tax bracket to the highest last year.

The ordinance creates a new business tax category for businesses that "generate revenues by providing access to Internet-based electronic applications or Internet-based search engines."

It lowers those businesses' taxes retroactively to Jan. 1.

Villaraigosa praised the ordinance earlier this month when it received unanimous approval from the City Council.

"By passing the Internet business tax ordinance, the city is once again proving its commitment to generating jobs and providing a business-friendly environment for every business," Villaraigosa said then. "This ordinance will be instrumental in attracting, retaining and growing the Internet industry in the city of Los Angeles and the good-paying jobs that this industry supports.

"Not only is this ordinance good business policy, but it is a proactive step towards increasing revenues and committing the city to long-term fiscal health," he added.

Council President Eric Garcetti conceded that reclassifying Internet-based businesses would reduce the city's revenue by about $3.4 million this fiscal year, but added the financial loss would be far greater if the businesses were to move out of L.A. in favor of other municipalities that charge less.

In her testimony before the City Council, Office of Finance Director Antoinette Christovale said the 1,400 businesses that fall under the new business tax classification provide about $6.8 million in overall revenue to the city.

"If they were to up and leave, it's not just the $3.4 million that you're looking at, it's the entire $6.8 million, and I think that's very key and important to note," she said.

During the same hearing, Los Angeles Area Chamber of Commerce president Gary Toebben praised the ordinance, calling it "the first step in a strategic plan to revise our tax codes so that we can target high-paying jobs for the citizens of our community and grow the tax base for Los Angeles."