WOODLAND HILLS—Woodland Hills is being considered as a possible site for a Bob Smith Mini Cooper dealership thanks to a recent proposal by Los Angeles Mayor Antonio Villaraigosa. The mayor, as a part of a plan to attract new dealerships to the city, has proposed the elimination of L.A.’s business tax on luxury car dealerships. The move is being done in response to dealerships having left en masse within the past 25 years as well as to keep the few dealers that are still in L.A.

The mayor himself has characterized the tax as being self-defeating, as the tax levied brings in only limited revenue while simultaneously scaring away businesses that would otherwise potentially bring in much more revenue by way of the sales tax. The city’s share of the sales would be around 1 percent of the price of a new car, while under the present system, dealerships are charged around $1.27 per $1,000 in gross tax receipts whether they turn a profit or not.

Presently there are 52 car dealerships operating within the city, which is significantly reduced from the 95 that were in business in 1986. Most of these businesses left the Los Angeles area for cities such as Glendale, Burbank and Pasadena.

The dealerships that have remained in L.A. account for approximately $3.6 million in business tax revenues, while the sales tax brings the city around $29 million.

Villaraigosa made the announcement of his new proposal in front of Beverly Hills Porsche, which will be moving to Westwood next year to take advantage of L.A.’s already approved three-year business tax holiday, which is in effect until 2012. The dealership becomes only the second to open its doors in the city in a quarter century.

City Council President Eric Garcetti commented on the matter saying, "It's time to stop surrounding cities from using LA's broken tax system to lure businesses and jobs away from us. Targeting car dealers is a big first step. But we must eliminate the business tax all together. LA's costly and cumbersome tax scheme is one that taxes businesses even when they lose money."

The policy also garnered support from 5th district City Councilmember Paul Koretz, who told Canyon News, "We welcome Beverly Hills Porsche to the 5th Council District in LA. We need to work to improve the business climate in LA to create jobs now and in the future—reducing our gross receipts tax is one important step in that process. Car dealerships have been crucial economic engines during past City of Los Angeles boom times, providing long-term jobs and fiscal growth and stability, so surgically targeting this key industry is a reasonable opening move and down payment on our commitment to business tax reform and a rejuvenated local economy."

Mayor Antonio Villaraigosa. Photo courtesy of his official website.

The policy does have its opponents, however. Analysis done by City Administrative Officer Miguel Santana along with Chief Legislative Gerry Miller warn, "Complete elimination of the business tax would be poor public policy. 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."

-