Eliminating business tax would be bad public policy, report says

Two top Los Angeles officials warn the City Council in a new report that eliminating the business tax without cutting services or finding new revenues would amount to faith-based budgeting, advising against it at a time when the city faces a deficit that could be as much as $250 million.

The city is under pressure to end its tax on gross receipts from business leaders who argue that it would spur existing companies to expand and encourage new ones to move into the city, eventually bringing more revenues from other types of taxes. L.A.'s business taxes are among the highest in the county.

"Complete elimination of the business tax would be poor public policy," conclude City Administrative Officer Miguel Santana and Chief Legislative Analyst Gerry Miller in a nine-page analysis released Tuesday. "This would increase the tax burden on residents or result in decreased city services which would make Los Angeles a less desirable place to do business."

Mayor Antonio Villaraigosa and some council members, including President Eric Garcetti, have called for the tax to be eliminated, saying that it has contributed to the city's reputation as a tough place to do business.