Tax Break Revenue Loss Needs More Study

October 8, 2015 by · Leave a Comment 

A Los Angeles City Council committee Monday called for further study of a plan that would offer a total of $54 million in annual tax relief to tens of thousands of small businesses by 2020.

The Budget and Finance Committee instructed city analysts to report back in 60 days on how the proposal — which would allow more small businesses to apply for exemptions from the city’s gross receipts tax — would affect city coffers.

One member of the committee also questioned whether the projected loss in revenue would likely be offset by any corresponding economic growth.

The city already exempts small businesses from paying its gross receipts tax but currently considers small businesses to be those with gross earnings of $100,000 or less each year.

Under the proposal by the Office of Finance, the threshold to be considered a small business would be raised to $250,000 by Jan. 1, 2016, to $500,000 in 2018, and ultimately to $1 million by 2020.

As many as 39,000 small businesses could start receiving exemptions from the tax on Jan. 1, 2016, a number that could grow to 72,700 businesses by 2020 under the proposal.

Finance officials estimate this proposal would eventually mean providing $54 million a year in small business tax credits.

Councilman Bob Blumenfield said Monday losing $54 million in potential revenue for the city would be a “big deal,” especially given a recent announcement by several City Council members and Mayor Eric Garcetti that they want to dedicate more city dollars to providing housing and services for the homeless.

“We’re looking for $100 million for homelessness — that’s half the amount,” Blumenfield said. “I would want to know we are getting good bang for our buck.”

The panel’s chair, Councilman Paul Krekorian, said the city is looking at several ideas for changing the city’s tax system.

“I think it would be valuable to have these ideas assessed by the CAO (City Administrative Officer) and the CLA (Chief Legislative Analyst) for their budgetary impacts and consider them in the context of all the other business tax reforms that we’re considering both in this committee and in other venues within the council,” Krekorian said.

Los Angeles is one of a dwindling number of cities that still collects taxes based on the gross receipts of businesses, and local chambers of commerce have long sought to get rid of this tax altogether.

The tax is projected to bring $491 million into the city’s coffers this fiscal year, as part of an $8.6 billion budget.

City officials have not agreed on a plan for phasing out the tax, despite having discussed the idea for years, according to Hollywood Chamber of Commerce President Leron Gubler.

The gross receipts tax “is a job killer, and it has been for the last 25 years,” Gubler said.

The more generous threshold for qualifying small businesses that is being proposed could mean that professional service providers, such as law firms, or jewelry stores and other businesses that sell “big-ticket items,” would also be able to apply for an exemption from the gross receipts tax, according to Gubler.

Gubler said even if some businesses bring in higher gross earnings, they may only employ five to 10 people, which typically qualifies them as small businesses.

“I’m encouraged they (the City Council) are at least considering this,” Gubler said. “The business community has been crying for relief from the gross receipts tax.”

Stuart Waldman, president of the Valley Industry and Commerce Association, said the proposal would be “a good first step” toward eventually eliminating a tax that is “essentially a punishment for doing business within city limits.”

“We would like to see it eliminated altogether, and hope that’s the end game,” he said.

The plan comes after city leaders vowed to draw up a “comprehensive plan” for creating a friendlier business climate in Los Angeles, especially after voting to raise the citywide minimum wage from $9 per hour to $15 per hour in 2020.

With the wage hike prompting outcry from the business community that it would lead to job loss, City Council President Herb Wesson earlier this year formed an ad hoc committee on job creation, specifically to work on a plan that would address those concerns.

Los Angeles Area Chamber of Commerce Senior Vice President Ruben Gonzalez said this latest proposal to give tax credits to more small businesses fits the bill.

Gonzalez said small business owners exempted from paying the city’s gross receipts tax would be able to reinvest their money into their workers and toward improving their business, which would be “very much in line” with the city’s efforts to create more jobs.

The current small business exemption “has proven to be an effective tool for the city in helping maintain and grow a sector that is key to the health of our economy,” Gonzalez said.

 

Contreras-Sweet Subraya la Importancia de que SBA Llegue a Todos los Rincones

May 15, 2014 by · Leave a Comment 

Programas de innovación, acceso a capitales o centros de formación para emprendedores son algunos de los servicios que ofrece la Administración para Pequeñas Empresas (SBA), según destacó el miercoles su directora, María Contreras-Sweet, con motivo de la Semana Nacional de los Pequeños Negocios.

Contreras-Sweet, quien apenas lleva 34 días en el cargo, enfatizó en una conferencia de prensa la necesidad de hacer llegar a todas las comunidades a lo largo y ancho del país las posibilidades que ofrece la agencia que ahora lidera donde, como subrayó, existe una variedad de programas de todo tipo para lanzar y consolidar nuevas compañías.

La Semana Nacional de los Pequeños Negocios 2014 arrancó este lunes en los cuarteles generales de Twitter en San Francisco (California), que sirvieron de escenario “para celebrar” y compartir “las historias de éxito” cosechadas por familias y emprendedores, para después recalar en Kansas, Boston y Washington DC con el mismo objetivo.

“Es muy importante que nos aseguremos de que todas las comunidades saben de los programas y servicios que tenemos”, recalcó la directora de la SBA, de origen mexicano. Contreras-Sweet relató las opciones a las que pueden acceder todos aquellos que quieran comenzar o mejorar sus pequeñas empresas y que cuentan con programas de acceso a capitales de inversión, así como con centros especializados para el asesoramiento financiero y empresarial.

La que fuera fundadora en 2006 de un banco con inversores latinos, ProAmérica Bank, en Los Ángeles, y presidenta y cofundadora de Fortius Holdings, una firma privada que provee de capital a pequeños negocios en California, insistió además en la capacidad que tiene la SBA para proporcionar contactos y conexiones entre las compañías, así como en el desarrollo de aquellas destinadas a la innovación.

El servicio estrella en este sentido es el Programa de Investigación para la Innovación de las Pequeñas Empresas (SBIR, por sus siglas en inglés), una herramienta “altamente competitiva” que fomenta que la pequeña empresa explore su potencial tecnológico e incentiva a comercializar dicho potencial para obtener beneficios.

Además, la mexicana también hizo hincapié en las posibilidades que ofrece la SBA allá donde los servicios privados no llegan. “A veces nos vemos envueltos en situaciones inesperadas que llegan y golpean nuestras comunidades. Y queremos estar seguros de que la SBA está ahí para ayudar a esas familias, a esas empresas, en ese tipo de necesidades económicas”, explicó la administradora.

Por ello, agregó, la agencia que dirige cuenta con un programa para asistir en esas situaciones en las que obtener un crédito privado sería muy difícil. Asimismo, Contreras-Sweet explicó las posibilidades que pueden hallar los veteranos en la SBA, a través de servicios que les ayuden a llevar a cabo una transición entre su etapa de servicio al país y su intento por emprender en un nuevo negocio como civiles.

Según dijo, la agencia cuenta con dos programas con ese fin, uno destinado a ayudar con la fundación, casi desde el inicio, de un nuevo negocio, y otro con carácter de asesoramiento a los veteranos que ya habían fundado sus empresas y que necesitan mejorar sus resultados.

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