Friday, July 10, 2009

How to drive off your tax base

From Reason magazine:

If New Yorkers fantasize that doing business here in Los Angeles would be less of a headache, forget about it. This city is fast becoming a job-killing machine. It's no accident the unemployment rate is a frightening 11.4 percent and climbing.

I never could have imagined that, after living here for more than three decades, I would be filing a lawsuit against my beloved Los Angeles and making plans for my company, Creators Syndicate, to move elsewhere.
From the beginning, we've been headquartered in Los Angeles. But 15 years ago we had a dispute with the city over our business tax classification. The city argued that we should be in an "occupations and professions" classification that has an extremely high tax rate, while we fought for a "wholesale and retail" classification with a much lower rate.
You can imagine how relieved we were on July 1, 1994, when the ruling was issued. We won, and firmly planted our roots in the City of Angels and proceeded to build our business.

Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling.
Regardless of the outcome of our case, the arbitrary and capricious behavior of some bureaucrats is creating a lose-lose situation for everyone involved. If we win in court, the taxpayers of Los Angeles will have lost because all those tax dollars will have been wasted on needless litigation.

If we lose in court, the remaining taxpayers in Los Angeles will have lost because their burden will continue to swell as yet another business moves its jobs—and taxpayers—to another city.

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