LA Cuts Taxes on Internet Companies–Mayor Says ‘If We Don’t Cut Taxes, They Will Leave.’

Yesterday, Mayor Villaraigosa signed a measure to cut business taxes for internet based firms. Last year internet firms were reclassified from multimedia to business and professions. It’s an important distinction because the former pay a city tax rate of $1.01 of gross receipts and the latter pay $5.07. The change was approved without dissent by the city council. The rate change is retroactive which will cost the city at least $3.4 million in revenue according to an article today’s Los Angeles Times Business Section by Phil Willon.

The mayor and the city council were clear as to the reasons for the change of heart–they believe internet based companies are easy to move and that the drastic increase in city tax would result in an exodus which would ultimately cost Los Angeles more revenue in the long run.

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