Rick Newcombe provides an insight into why Los Angeles is suffering from a killer combination of rising unemployment and tax rates that no longer meet expenses:
[. . .] 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.
The rule of law requires that both parties are equally subject to the outcome of a trial, win or lose. The city clearly feels that it’s above that.
(Cross-posted to the old blog, http://bolditalic.com/quotulatiousness_archive/005574.html.)
