Officials say not getting rid of the tax will drive investment firms that manage mutual funds out of the city and put an additional $12.5 million in tax revenue at risk.
The Jobs and Business Development Committee will discuss the issue during its afternoon meeting.
Los Angeles is the only city in California that enforces a tax on mutual funds, according to a report by Chief Legislative Analyst Gerry Miller.
"The state and federal governments exempt mutual funds from taxation as they are considered 'pass-through' entities," Miller wrote in the report.
"Taxes are levied on investors when they earn gains on their investment, not on the mutual funds themselves."
A mutual fund is a pool of money from a variety of investors managed with the goal of earning greater returns on investments in securities, stocks, bonds and other money instruments. Managers charge investors fees to put their money in mutual funds.
The city taxes both the management fees and the financial gains on the mutual fund investment.
Miller said some investment firms have threatened to move outside of the city because of the tax. His report recommends reducing it by one-third starting next year until it is completely eliminated.
Councilman Richard Alarcon, chairman of the Jobs and Business Development Committee, is generally
supportive of the idea, spokeswoman Becca Doten said. But he is waiting to hear input from the city's Business Tax Advisory Committee before making his final decision about whether or not to eliminate the tax on mutual funds.Source: http://www.dailynews.com/news/ci_18173995?source=rss
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