Los Angeles lawmakers voted Tuesday to lower the city’s business tax starting in 2016.

Business leaders have long argued that L.A.'s business tax rate -- the highest in the county -- puts local firms at a competitive disadvantage. Since taking office in 2013, L.A. Mayor Eric Garcetti has promised to reduce the tax to stimulate economic growth in the city.

But faced with a $242-million budget shortfall last year, Garcetti proposed and won City Council approval of a three-year reduction in the tax rate, beginning next year.

The changes, which will trim city revenue by $45 million in three years, were formally approved by the City Council on Tuesday. They now await Garcetti’s signature.


“The business tax is essentially a punishment for doing business in the city,” said Valley Industry and Commerce Assn. President Stuart Waldman in a statement. “We’re happy to see that the mayor and the council have recognized this, and are taking actions to right it.”

If approved as expected by the mayor, the tax rate would drop from $5.07 for each $1,000 of gross receipts to $4.75 in 2016. The following year, the tax rate would move to $4.50 and then $4.25 in 2018.

Gary Toebben, president of the Los Angeles Area Chamber of Commerce, said in a statement that the existing tax is “detrimental to recruiting new businesses and to retaining and growing existing businesses.”

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