The multitude of challenges that the new mayor of America’s second largest city will face starting tomorrow constitutes a laundry list of items. None needs greater focus than revamping the Office of Finance and the business licensing process. If Los Angeles ever wants to regain its business friendly status, this is where he needs to start.
There are many tools the City of Los Angeles has found to antagonize current and prospective businesses, but the licensing process and the people who oversee it are at the top -- largely because Los Angeles has been in such need of revenue they have attacked businesses like a mortal enemy. Here are some of the many ways they do it:
1. It starts with the rates. I actually have not had my business in Los Angeles for 24 years and doubt I would move back. For the honor of being a business in Los Angeles I would pay more than five times as much as I do to West Hollywood. This is not like moving states for lower taxes. For many businesses it is moving blocks when the opportunities occur to avoid the oppressive and complicated tax system. But it is more than money.
2. Because of the confusing tax structure, sometimes businesses find they have been either charged the wrong rate or they can take advantage of a rate that is advantageous to a favored group, like the entertainment industry. When that occurs the City does not return your money; it gets applied against future license fees. They make it even harder. The credit is not shown on your statement -- you have to call the Office of Finance, contact the person with whom you previously worked and get the credit applied against the current year’s fees. Heaven knows what happens if that person retires or gets kidnapped by aliens. It is a uniquely anti-taxpayer system not employed by any other tax collection agency of which I have become aware.
3. This one is rich. You and your sister own a cookie store in partnership. You have a business license for 20 years in the same location. Lil’ sis decides 20 years of being cookie queen is enough. You decide you want to continue on as a sole proprietorship. The city determines you are a new business and sends you a bill for last year and well as this year, even though you already paid for last year as a partnership. You are the same business continuing in the same location, but city rules say they can charge you twice for the same year. This actually happened to a client of mine. Fortunately, I found a nice lady in the Office of Finance to whom I told the cookie store story, and she got it. Two hours later she called and told me her boss had killed the bill. But how many people have paid because they did not have a hired gun like me. To add to the stupidity, a week later we received a letter stating we had not paid taxes for the new entity for the prior four years. Fortunately, I got that killed also.
4. While holding on the line at the Office of Finance they run some messages one of which touts how their reforms have saved taxpayers over $90 million dollars. What they refer to in their hype is how people who gross less than $100,000 ($300,000 if you are in entertainment) in a year are tax exempt. Well, unless you don’t file your form timely then you owe big time because you owe on your revenues and penalties and interest. For small business people this is just a trap and churns unnecessary paperwork. And why does the hairdresser or interior designer who grosses $125,000 have to pay taxes, but the entertainment person does not? Everyone should be treated equally.
These are just a few of the challenges facing Los Angeles’s new mayor with a tax system that chases business out of the city and places a bigger burden on the remaining businesses. The city is now doing more and more audits to generate more revenue to feed the monster all the time antagonizing business owners even more.
If he wants to generate more revenue and balance his budget, Mr. Garcetti needs to revamp his entire tax operation and stop the city from treating business as the enemy. Mr. Garcetti -- that is Job #1.