Hahn Hopes Tax Break Will Bring Small Businesses to L.A.

Trying to lure more small businesses to Los Angeles, Mayor James K. Hahn urged the City Council on Tuesday to extend the city’s tax moratorium for new establishments from one calendar year to two.

Hahn said a longer business tax exemption would ease the financial burdens on small businesses, increasing their chances of staying open and encouraging more companies to locate in Los Angeles.

“We want more small businesses to think of Los Angeles first,” Hahn said, during a morning news conference at a week-old Ventura Boulevard hair salon in Studio City. “We’re putting out the welcome mat here.”

Under Hahn’s proposal, businesses with less than $500,000 in taxable gross receipts in their first year would be eligible for the exemption.

The city exempts new businesses from business tax in their first calendar year of operation. If a business opens in October, however, it is only tax-free until the beginning of the next calendar year. Hahn’s proposal would exempt that business for another full year, to the second January.

While the moratorium could cost the city an estimated $5.8 million in tax revenue annually, the mayor said it would eventually bring in more money by broadening the tax base.

“Let’s not think about trying to divide the same pie over and over again,” Hahn said. “Let’s figure out how we bake bigger pies.”

Nir Zilberman, who owns the hair salon Kriza where Hahn made his announcement, said the exemption would save him about $3,000 a year, and would convince him that “city people are committed to my success.”

City Councilman Jack Weiss, who joined the mayor at the news conference, said Ventura Boulevard has been defined by the swath of small shops and restaurants that line the busy corridor.

“The small businesses around here add vitality to the area, provide quality services for residents and provide jobs,” he said. “In the new economy of L.A., it’s more important than ever that we nurture small businesses along.”

When the City Council met later Tuesday, Weiss introduced a motion directing the city attorney to draft an ordinance that would extend the tax break. The motion was referred to committee.

Hahn acknowledged that the exemption was a “modest proposal,” but said it was the first in a series of efforts to reform the complicated city tax code. During the mayoral campaign, Hahn pledged that one of his top priorities would be making the city more business-friendly.

“We are still working on collapsing the 64 different categories we have for business taxes in the city,” he said. “Business tax needs to be understandable to a business owner, needs to not be confusing, needs to be perceived as fair.”

Mel Kohn, president of the city’s business tax advisory committee, said the measure would bring in new businesses that would more than replace the initial loss in revenue.