LOS ANGELES — Mayor Eric Garcetti signed into law last week a series of tax cuts for businesses that pay the highest amounts to the city, as one business group announced its official endorsement of his plan to raise the minimum wage in Los Angeles to $13.25 by 2017.
Garcetti said the reductions, which are part of an overall economic strategy that includes the minimum wage hike proposal, “will entice more businesses to stay, come and hire in L.A.”
Los Angeles is “home to the highest and most complicated business tax of any leading city in L.A. County,” he said, noting that the reduction that became law Feb. 11 is only the first step toward completely phasing out the city’s gross receipts tax.
The law — which won support earlier this month from the Los Angeles City Council — will reduce the top tax rate from $5.07 per $1,000 of gross receipts to $4.75 in 2016, then to $4.50 in 2017 and $4.25 in 2018.
The taxes are currently paid by a wide variety of businesses and sole proprietors, including pet supply stores, independent artists and writers, janitorial companies and legal professionals.
The reduction in business taxes will mean a $45 million reduction in revenue for the city’s coffers over a three-year period, according to Councilman Paul Krekorian.
The councilman called the gross receipts tax a “relic” and said the city will continue to reduce and simplify its business taxes. The city’s revenue from its gross receipts tax accounts for 10 percent of the city’s budget, Krekorian said.
The tax cuts were key to the Los Angeles Business Council’s official endorsement of Garcetti’s minimum wage hike plan.
That group’s President Mary Leslie said members “studied carefully Mayor Garcetti’s comprehensive economic proposal and agree that increasing the minimum wage to increase aggregate income of all hardworking Angelenos is one of the key plans of a healthy city.
“It is in this spirit that the L.A. Business Council endorses Mayor Garcetti’s minimum wage proposal and this integrated approach to include affordable housing, business tax relief and the minimum wage together,” she said at the City Hall signing event.
Two other key business groups — the Los Angeles Area Chamber of Commerce and the Valley Industry and Commerce Association — have both come out against the mayor’s minimum wage hike plan.
The two groups have said the business tax reduction is a good step, but pointed out that earlier plans entertained by the city had been more aggressive.
The City Council is debating the mayor’s plan, as well as one that would continue to increase the minimum wage to $15.25 in 2019. The mayor’s plan currently pegs the increases after 2017 to the cost of living index.