Business tax-reform package could make city more business friendly and stimulate real estate demand Laura Coleman The reform plan exempts business owners making up to $100,000 from business tax, eliminates the tax on "bad debts" and exempts business owners from paying taxes on payments not yet received. Additionally, entertainment industry workers classified as "talent" making up to $300,000 will be exempt from the business tax. Dolores Conway, director of the Casden Real Estate Economic Forecast for the USC Lusk Center, said the tax relief would help sustain the state's slow and steady employment growth. As a result of higher employment levels, Conway said demand for office space would pick up and push down the city's high office vacancy rates, as well as increase demand in the residential market. "We know from economics that the tax relief for businesses would make it easier for businesses to increase their employment and increases in employment are very good for real estate," Conway said. "Tax relief for business would help to foster increased employment and that has positive effects on real estate." In recent years, amidst the steady exodus of California businesses moving out-of-state - even overseas - to stay afloat in a receding economy, politicians have faced increasing pressure to improve a taxation system that many contend is too onerous for the state's own good. According to Christopher Thornberg, senior economist with the UCLA Anderson Forecast, an estimated 1.8 million informal workers are absent from the state's formal payroll numbers. At the UCLA Anderson Forecast conference on Dec. 8, Thornberg could not say whether the 12 percent employment base operating "underground" in California paid taxes, but reducing the tax burden on smaller business could bring more onto the tax rolls. A better business environment and correlate job increases would stimulate real estate investment, explained Tara Bannister, executive director with the California Apartment Association in Los Angeles. "L.A. has a staggering for-sale and for-rent housing shortage," Bannister said. "Anything we can do to make it cheaper to build, to own and to manage apartments benefits my members. "For the apartment industry, reducing taxes isn't about saving people money, it's about giving people money that they can re-invest in their property to improve the quality of life for Angelinos."
January 3, 2005