A Tax On Legal Services? Fees Will Rise

Estimates of Connecticut’s budget deficit for the current fiscal year range from about $200 million to more than $350 million. No wonder lawmakers are looking everywhere they can for extra tax dollars.

The Connecticut Bar Association fears that lawmakers may be looking to tax legal services. That makes about as much sense as selling life preservers on a sinking ship: All that will be accomplished is more deaths by drowning.

I suppose the new tax will work something like this: A client pays a retainer of $10,000 for representation in a felony case. You take the money and assess the new tax. Let’s say it is a two percent tax. My fee for that same case will now rise by at least $200.

But is that enough? Not really. I will need to train staff to fill out forms. My accountant will need to audit compliance and, perhaps, prepare quarterly reports. New paper trails will need to be blazed and groomed.

So rather than raise rates by two percent, I’d better raise them some to account for additional time and expense of compliance. Add another two percent, or make it now $10,400. But that’s an awfward number, so $10,500 it is.

The point is a simple one. A tax on services will be transferred to clients, thus driving up the cost of legal services.

Frankly, I’ve already raised rates to accommodate the new changes in the Rules of Professional Conduct. There is no end to the grief many clients face, and with heightened communication requirements, more time needs to be spent on each file. That means fewer clients, as the cost of running a practice is not decreasing.

I realize this may sound like sour grapes. But it really isn’t. Consider the hidden costs of a criminal case.

First, you agree to represent someone up to and including trial. That much is simple to forecast. Some trials take longer than others. That’s life. But sometimes the court system throws a curve ball or two. I recently had a case called for trial three times. We had to prepare three times. In two instances the case was continued the day evidence was to begin. The client was unwilling to replenish the retainer. That’s also life.

But then there is the cost of keeping a copy of the file. Should the trial not work out as planned, there is a Sentence Review hearing, which is mandatory for trial counsel. Should the client really get hammered, expect a habeas. Six, seven, eight, ten years down the road you’ll be on the stand testifying at your own expense. And let’s not forget all the phone calls from mom, dad, sister and brother that are expected to be answered. Lawyer beware, I say.

I do not oppose an increase in the attorney occupational tax, however. That is a one-time deal, and there are no administrative costs. The money should go to legal assistance, which is a great cause. Press reports relay that funding cut backs to these lawyers have them working second jobs.

Of course, the real solution to the problem of legal services is one we don’t have the courage to enact. I say every person charged with a crime should have a right to a public defender. There is no reason why lower-middle class and middle-class families should be ruined by legal expenses. And if lawmakers had to fund defense as well as prosecution they might be a whole lot less trigger happy when it comes to enacting new laws. The well-heeled can always opt out and hire private counsel.

And on the civil side, I say revise the American rule. Require the loser to bear court costs. Requiring litigants and their counsel to reckon the cost of an action might screen cases of questionable merit. Folks without means could apply for a waiver.

Times are tough and set to get tougher, I hear. Maybe this is a good time to think about how and when we pay for legal fees.

Reprinted courtesy of The Connecticut Law Tribune.


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