Economics

Why We'll Leave L.A.

Arbitrary and capricious behavior by local lawmakers is chasing business out of the City of Angels

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If New Yorkers fantasize that doing business here in Los Angeles would be less of a headache, forget about it. This city is fast becoming a job-killing machine. It's no accident the unemployment rate is a frightening 11.4 percent and climbing.

I never could have imagined that, after living here for more than three decades, I would be filing a lawsuit against my beloved Los Angeles and making plans for my company, Creators Syndicate, to move elsewhere.

But we have no choice. The city's bureaucrats rival Stalin's apparatchiks in issuing decrees, rescinding them, and then punishing citizens for having followed them in the first place.

I founded Creators Syndicate in 1987, and we have represented hundreds of important writers, syndicating their columns to newspapers and Web sites around the world. The most famous include Hillary Clinton, who, like Eleanor Roosevelt, wrote a syndicated column when she was first lady. Another star was the advice columnist Ann Landers, once described by "The World Almanac" as "the most influential woman in America." Other Creators columnists include Bill O'Reilly, Susan Estrich, Thomas Sowell, Roland Martin and Michelle Malkin—plus Pulitzer Prize-winning political cartoonists and your favorite comic strips.

From the beginning, we've been headquartered in Los Angeles. But 15 years ago we had a dispute with the city over our business tax classification. The city argued that we should be in an "occupations and professions" classification that has an extremely high tax rate, while we fought for a "wholesale and retail" classification with a much lower rate. The city forced us to invest a small fortune in legal fees over two years, but we felt it was worth it in order to establish the correct classification once and for all.

After enduring a series of bureaucratic hearings, we anxiously awaited a ruling to find out what our tax rate would be. Everything was at stake. We had already decided that if we lost, we would move.

You can imagine how relieved we were on July 1, 1994, when the ruling was issued. We won, and firmly planted our roots in the City of Angels and proceeded to build our business.

Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling.

Their official position is that the city is not bound by past rulings—only taxpayers are. This is why we have been forced to file a lawsuit. We will let the courts decide whether it is legal for adverse rulings to apply only to taxpayers and not to the city.

We work with hundreds of outside agents, consultants, independent contractors and support services —many of whom pay taxes to the city of Los Angeles. This spurs a job-creating ripple effect on the city's economy. Yet I suspect many companies like ours already have quietly left town in the face of the city's taxes and regulations. This would help explain the erosion of jobs.

Regardless of the outcome of our case, the arbitrary and capricious behavior of some bureaucrats is creating a lose-lose situation for everyone involved. If we win in court, the taxpayers of Los Angeles will have lost because all those tax dollars will have been wasted on needless litigation.

If we lose in court, the remaining taxpayers in Los Angeles will have lost because their burden will continue to swell as yet another business moves its jobs—and taxpayers—to another city.

As long as City Hall operates like a banana republic, why is anyone surprised that jobs have left the city in droves and Los Angeles is teetering on the brink of bankruptcy?

Rick Newcombe is the president of Creators Syndicate. You can read more about him here. A version of this also ran in The Wall Street Journal.

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  1. I’m thinking Vegas looks like a good place to move a business to, if you’re fleeing LA. The real estate bust has made office space dirt cheap, it’s still a 24-hour city if you’re looking for something to eat, and there are plenty of former bank and real estate workers available if you need to hire staffers.

    -jcr

  2. My initial reaction was “You’re suing them again?!? Why not just pack up and leave and be done with it?”

    Then I realized that even if you do leave, those penalties and interest fees aren’t going anywhere.

    I hope you ask the court that the City of Los Angeles pay for your U-Hauls.

  3. Sounds like how the Bloomburg Kingdom operates. Sad

  4. I definitely agree with John. Get yourself out of the Peoples Republic of California and up here to Vegas as fast as you can. The lack of state income tax is worth it all by itself, but we’re more freedom-friendly in general.

  5. Then I realized that even if you do leave, those penalties and interest fees aren’t going anywhere.

    What is the city going to do if you refuse to pay? Take you to court?

  6. Ugh. The City of L.A. business income tax is one of the more tyrannical in the country. The tax is on gross revenue, not profits, so you can lose money in a fiscal year and still pay. And it gives huge exemptions to “Hollywood” writers and “creatives,”; why? I guess because they’re better than any of us.

    Screw L.A.

  7. The tax is on gross revenue, not profits, so you can lose money in a fiscal year and still pay.

    That’s probably a reaction to hollywood accounting. The movie business is notorious for it.

    -jcr

  8. Why do I think people belonging to said syndicate voted for the sort of politics that put California in that position in the first place? Note to Californians fleeing their state: please please PLEASE don’t bring the leftism with you.

  9. I’d hardly call many of the columnists of Creators Syndicate “liberal”, but is does bring up a good point: what are the odds that these transplants have learned their lessons about statism? Are they genuinely dissatisfied with how CA is? Or are they just looking for a new shot at a free lunch somewhere else?

  10. With three fine universities in the city limits (UCLA, USC, Loyola Marymount), great weather, a major international airport, and the biggest seaport, L.A. thinks it can do whatever it wants to private businesses. What they fail to realize is that businesses don’t have to move 100 miles away; they can move to any of hundreds of local pro business jurisdictions, including Torrance, Glendale, Pasadena, etc.

    What a bunch of incompetent boobs. However, don’t blame the politicians. They’re symptoms of the problem, a stupid uneducated and third world electorate that has no concept of how important a pro-free market government is to their own standard of living.

  11. I’m thinking Vegas looks like a good place to move a business to, if you’re fleeing LA.

    A busted real estate market isn’t as good a recommendation as one that’s healthy, but much less expensive than LA. You might want to look at Austin. Texas also has no state income tax, personal or business, and you can get a deal on “Keep Austin Weird” bumper stickers to ease the culture shock.

  12. I have heard a lot of good things about Austin. And don’tcha know it’s one of the “secret” cultural centers of the U.S.?*

    *see: Seattle, WA, Portland, OR, Columbus, OH, Huntsville, AL

  13. Not to bring logic into the conversation or anything, but “Wholesale & Retail”? Seriously? Do I get a discount on if I buy a case of Hillaries? Not to let the city of the hook for acting like, well, mindless money grubbing bureaucrats, but how did you convince a court that representing speakers and writers is the same as selling spatulas?

  14. It would have been illuminative if you had written what the actual tax rates were and the net sums involved.

    Also, have you considered the benefits that would be lost by moving?

    I live in the DC Metro area and I can assure you that I cannot have a large cannabis plant in my backyard.

    The DC Metro area also is overrun with gang stalker rackets that vacuum up money from people for “protection” and who then find some completely harmless fellow to stalk, harass, poison and irradiate while the police and government pretend not to notice. I understand that is also not a problem in LA.

    Is that accurate?

  15. You might want to look at Austin.

    heat that makes you long for the cool breezes of vegas. hippie-dippie leftist government. high property taxes. the most distracted drivers in christendom.

    no, please don’t come here. my commute is already too crowded.

  16. I wish, in articles like this, the author would name names, like the name of the specific bureaucrat who sent the letter rescinding the tax classification and post-dating it to 2004. Surely it wouldn’t be that hard to find out whose decision it was, and it’s such a terrific decision, that the person or persons responsible really should have their expertise publicized. (Personally, I’m betting it will be a Latino name, possibly a relative of our esteemed mayor, but I’d be thrilled to be proven wrong.)

  17. Not to let the city of the hook for acting like, well, mindless money grubbing bureaucrats, but how did you convince a court that representing speakers and writers is the same as selling spatulas?

    I can reasonably see how being the middle man between a writer and various newspapers can be considered wholesale.

    And it makes at least as much sense as “Occupations and Professions” which I would assume is aimed at doctors and plumbers, etc.

  18. I know of a place, that you can go to that CS can be free of tyranny and never have to worry about paying extortion rates to do business there nor have to go to court and pay legal fees.

    It’s called New Hampshire. And whether its Nashua or Concord or Keene or Manchester, you’ll never have to worry about your freedom again. Not within this Free State.

    Check it out by going to http://www.freestateproject.org

  19. New Hampshire’s governor to medical marijuana patients: “Live Free or Die.”

  20. Rick, how many checks did you write to Dems in the past, oh ten elections in and for the county of LA and USA? Just ya know wondering and thinking what goes around is fun to watch land on the heads of those who helped build the crash. Just ya know thinking out loud here…

  21. “I wish, in articles like this, the author would name names, like the name of the specific bureaucrat who sent the letter rescinding the tax classification and post-dating it to 2004. Surely it wouldn’t be that hard to find out whose decision it was, and it’s such a terrific decision, that the person or persons responsible really should have their expertise publicized.”

    In my limited experience with the hoard of faceless, nameless bureaucrats which have basically taken over state and local governments, they tend to roam in packs and sign thier letters with the name of the bureaucracy which represents them, not individually. You know, to keep people from calling them out on their bullsh*t and finding out where they live.

  22. This is not arbitrary and capricious. This is across the board and affecting multiple city agencies.

    Since the tax propositions got shot down, my employer/landlord (and yeah, that works about as badly as you’d expect) has been hit with the Department of Corporations and the Housing and Building Departments (yep, different agencies)reopening old, settled claims and demanding back monies they once dismissed as well as damages.

    This is simple predation by the rulers on the ruled.

    And of course they’ll bring their leftism with them when they flee the state. They’re lefties, remember? You can’t possibly think this is THEIR fault…

  23. JCR:

    “it’s still a 24-hour city if you’re looking for something to eat”

    Considering there are few decent restaurants open past 10pm in LA, that’s a big plus. That said, I moved here about a year & a half ago and I’m doing “ok”, but things are getting harder for me too – but if I move, I think I will move out of the country. Perhaps I will follow Jim Rogers to Singapore… One of my best friends already lives there.

  24. I’m doubtful there is any place worth moving to in the USA, thanks to compulsory miseducation and the trend that has taught young people to depend on the government (and its theft from people who actually produce value) for everything.

    Not that other countries are much better any more. They and the USA have mostly adopted the same bad ideas.

  25. I have heard a lot of good things about Austin. And don’tcha know it’s one of the “secret” cultural centers of the U.S.?*

    *see: Seattle, WA, Portland, OR, Columbus, OH, Huntsville, AL

    *spews bourbon*

    Columbus? Go on, pull the other one.

  26. Taxing specific goods and services at different rates is bullshit in the first place. All things should be taxed at an equal rate.

  27. I heard Newcombe on KFI’s John & Ken show, and the hosts pretty much nailed it: this is freaking mob tactics.

    “Yeah, sorry, Luigi, but the protection costs are going up. The Don is having trouble making ends met and needs a new Bentley. Oh, and the interest on your little loan is doubling, retroactive to four years before you borrowed the money. You know how it is.”

    I’m doubtful there is any place worth moving to in the USA, thanks to compulsory miseducation and the trend that has taught young people to depend on the government

    Oh, this dippy shithole of a country is doomed. Count on it. Of the dozen people I know who are within 5 to 8 years of retirement, *ten* are looking at overseas options.

  28. And this is the reason why so many businesses ostensibly located in “Los Angeles” are actually located in the independent cities/inner suburbs like Culver City,Burbank, and the aforementioned Glendale, Torrance, and Pasadena. It’s really not worth the bureaucratic hassle of dealing with the city of L.A. This is also another reason why more parts of L.A. should secede. Valley secession had little support, Hollywood secession had almost no support beyond the bar owner who got the secession measure on the ballot, but Venice and San Pedro secession have considerable support (in the case of the Venice secession movement, which has existed ever since L.A.’s blatantly illegal annexation which was an invasion in all but name, the overwhelming majority of Venice residents support seceding from L.A.) Breaking up the city of L.A. may be the way to go – it may be one of those “too big to fail” institutions that shouldn’t exist in the first place.

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  31. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke

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