You Broke That Thing, You Bought It

While the Minnesota Bar Association is officially non-partisan, most “Trial Lawyers” support the DFL; “Trial Lawyers'” political giving runs about 11-1 for the Democrats, nationwide.

In other words, like most liberals, they’re all for taxes…that affect other people.

But Governor Messinger’s Dayton’s new budget?  That’s different:

Today Gov. Dayton unveiled a budget plan that includes a sales tax on legal services. If the proposal becomes law, Minnesota would become only the fourth state to tax legal services. The Minnesota State Bar Association strongly opposes taxing Minnesota citizens and businesses that need legal advice to plan for their futures and protect themselves.

Robert Enger, a legal aid attorney from Bemidji and president of the Minnesota State Bar Association, refers to a tax on consumers of legal services as a “misery tax.” Individuals and families often need to hire lawyers when they are vulnerable and suffering; such as a victim of the economy filing for bankruptcy, a family facing foreclosure, or an innocent victim paralyzed by a drunk driver. A sales tax on legal services would push citizens to either forego their legal rights or attempt to represent themselves in the complex justice system. Minnesota’s court filing fees are among the highest in the nation, which creates an access to justice problem that will only be exacerbated by taxing legal services.

A 5.5 percent sales tax on lawyers means 5.5 percent fewer people will hire lawyers.

The overwhelming majority of states don’t tax legal services because it is widely considered poor public policy and economically damaging.

(Note: that’s true of every good or service.  But let’s not digress)

Business will be burdened with significant additional costs, and the tax will be especially unfair to small businesses. Corporations large enough to employ lawyers will avoid the sales tax, while smaller businesses will have to pay. Businesses needing legal assistance to expand or locate in Minnesota may choose to do go elsewhere, and Minnesota law firms with national and international practices will have every incentive to relocate attorneys and staff to one of the many states that do not tax legal services.

It’s not just that lawyers are having trouble – although even in good times, Minnesota creates about a third as may lawyer jobs as it does law school graduates.

It’s that when a regular schnook does need a lawyer, it’s usually a stressful situation; it’s already hideously expensive.   And if you need the lawyer to fight a big corporation or any level of government, you’re already at a disadvantage; Governor Messinger’s Daytons’ plan will leave you at a 5.5% worse disadvantage.

To which liberals – in this case, a west-metro DFLer on Twitter – say “Let them eat cake!”:

I guess that settles that, then!

16 thoughts on “You Broke That Thing, You Bought It

  1. Thousands are pro se, and it is nearly always a mistake. The group that really gets screwed here is small business owners. Too many of them are taking Sue Lanto’s advice and going pro se. Dayton’s new tax will make this worse.

    It cannot be noted enough: The competition is not between Big Business and the government, it is between Big Business and Big Government on one side and small business on the other. Until the left figures out that Big Business is not capitalist, that it spends millions on lobbying for rent seeking, and that the only way to take care of that problem is by making government smaller and less powerful, they will never solve any problem they claim to want to solve.

  2. So, it’s perfectly acceptable to tax the poorest of the poor to clothe their children, but dip into the pockets of some pin-stripped, ambulance chasing DFL campaign financier?

    As Lambo might say, thems fightin’ words.

  3. I’m guessing that potato sacks figure into Ms. Lanto’s solution for clothing poor kids.

  4. Until the left figures out that Big Business is not capitalist, that it spends millions on lobbying for rent seeking, and that the only way to take care of that problem is by making government smaller and less powerful, they will never solve any problem they claim to want to solve.

    The “left” made its peace with that a long time ago, PJK. Big business makes an excellent client for Big Gubmint. Neither entity has any interest in solving the problems they purport to want to solve.

    Paradoxically, it’s the right that needs to make the “fairness” argument about the incestuous relationship between Big Business and Big Government. Romney talked about it in the campaign to an extent, but because he was seen as a Big Business guy (rightly, I’d add), the message didn’t compute for low information voters.

    The one guy who makes the argument well is Ron Johnson, the senator from Wisconsin elected in 2010.

  5. middle class can go pro se if not poor enough for pub defender & too cheap for atty. Thousands are pro se.

    Yes, just look for the cases where one of the parties is named “Fool.”

    In all seriousness though, this is (another) issue where I part ways with MSBA (of which I am no longer a member). If we’re going to have a sales tax, then I’d prefer one that was as simple as possible and broadly applied. Don’t carve out these exceptions for a particular item or service but instead tax all goods and services once at the same rate. And don’t have it higher for some people with a special “credit” at the end of the year like is done for renters. Everyone has the same skin in the game and maybe that will make some people less likely to vote to raise taxes when they’ll be the ones paying them too.

  6. “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it”. ~Ronald Reagan

    The trial lawyers tears come late and seem selfish. We all know the truth is that the spenders of other peoples money are coming after all of us that still have 2 nickels to rub together, do the lawyers really think the grabbers care about any implications. The theives demand one of our nickels to redistribute in accordance wth their “plan”. You can bet they’re trying to figure out how to divide the other nickel as well.

  7. Mr. Enger’s argument against the taxation of legal services seems reminiscent of the one made by “gun fanatics” against the disclosure of mental and medical records by practitioners to those seeking to determine an individual’s fitness for gun ownership; it could deter those in need from seeking help. Guess it’s now a valid arguement.

    How about a substantial tax on punitive damages, collected after the plaintiff has been compensated for actual losses and before the attorney takes her/his percentage? The true victim would still be made whole, the wrongdoer would still be punished, and the state would benefit?

  8. I say let’s take that further;
    1. in lieu of taxes, limit the attorneys fees to say 10% above the firm’s actual costs of litigation. 10% is a fair profit.
    2. institute tort reform to limit the damages that can be awarded and/or make plaintiffs pay up from the get go rather than on contingency. The punitive damages awarded in the majority of cases are ludicrous.

  9. Trial lawyers are probably the only profession where the practitioner can keep 70% (or whatever the number would be) of the revenue. Not the profits, but the actual revenue of his business. That is why we have slimball trial lawyers trying all kinds of new ways to sue businesses.

    And wait until the gov’t declares gluten allergies (and similiar food reactions) to be a disabliilty protected under the ADA.

    Yes, a Target, McDonalds, General Mills, will survive. I’d hate to be involved in a startup business right now.

  10. In Wisconsin, the Republicans passed a law last year limiting lawyers income to a certain percentage above punitive damages. The origins of this law was a trial lawyer who was suing car repair facilities over minor issues, but then taking in incredible money. So the person allegedly harmed by a car repair gets…say $4,000 in to cover the faulty repair and some extra cash for her troubles, while this lawyer would take in…..maybe $20,000. (numbers could be different, but you get the idea).

  11. Economics is the study of the rationing of scarce goods (lately a new definition has been making the rounds, “the rational allocation of scarce goods”, which is not quite the same thing).
    Anyway, it the idea is this:
    Human needs are infinite. Goods are scarce. Not everyone can have everything.
    Government, in the liberal mind, exists to supply human needs. Since it is impossible for government to do that (see above), government should, instead, expand until it consumes whatever resources are available for its use. Those are called private assets, e.g., resources controlled by non-government actors.

    American household wealth totaled more than $58 trillion in 2010. A flat wealth tax of just 1.5 percent on financial assets and other wealth like housing, cars and business ownership would have been more than enough to replace all the revenue of the income, estate and gift taxes, which amounted to about $833 billion after refunds. Brackets of, say, zero percent up to $500,000 in wealth, 1 percent for wealth between $500,000 and $1 million, and 2 percent for wealth above $1 million would probably have done the trick as well.

  12. A couple of observations. First, the governor knows that one of the legislative bodies will nix the legal tax. I heard the lawyers bemoaning the tax as a misery tax. People with legal trouble who are in misery will now be taxed for their misery. Hey isn’t that the argument used for the MNCare tax? Yes it was and the legislators at that time said it will make medical providers more efficient. I remember that line well. What a load of whining. But the legislature is filled with lawyers so it is likely to get nixed.

    Second, the proposal on putting sales tax on clothes over $100 is stupid and puts a burden on retailers. If I was a retailer, the sales would all be $99 sales. Retailers can game the tax like crazy. For instance everything is $99 but you have to buy one item with a red tag (items normally retailing for $150-200) and two items with a blue tag (items retailing normally for $25-75). Games like this will be played all day long. Will uniforms be exempt? Will antique clothing be exempt? Think of all the exemptions.

    When are we going to address the three legged stool silliness? Why do we have to equate property, income and sales taxes? Up until the late 60’s, it was a 2 legged stool and the state had run well that way. Then the sales tax was instituted as a temporary sales tax to fund the “emergency” in education. Go back a few decades before that and it was a one legged stool as there was no sales tax and no income tax. How did those governments ever survive? The three legged stool appeals to someone whose own life is so disordered they try and seek order in a tax equality scheme. God help us.

  13. There are about 30,000 lawyers in Minnesota (I know, far too many) but only a thousand or so are “trial lawyers.” The rest handle ordinary legal problems, everything from adoption and bankruptcy to wills and zoning.

    The proposed sales tax on lawyers is not a tax on lawyers. It’s a tax on the fee charged for advice given to clients, a tax that will be collected by lawyers. Some people might employ lawyers all the time (banks) but the “misery tax” objection is for people who hire lawyers because they must. Compare to professionals in other situations:

    You get hit for a random IRS tax audit. Handle it yourself or hire an accountant? Don’t be a fool – get professional tax advice. She charges you a fee. Should you pay sales tax on that fee?

    You get hit by a drunk driver who breaks your leg. Set it yourself or go to the emergency room? Don’t be a fool – get professional medical advice. The doctor charges you a fee. Should you pay sales tax on that fee?

    A madman kicks down your door and comes into your house shooting. You return fire and kill him. The police arrest you for murder. You don’t qualify for a free lawyer. Go to court Pro Se or hire a lawyer to help you make a self-defense case? Don’t be a fool – get professional legal advice. She charges you a fee. Should you pay sales tax on that fee?

    In each situation, somebody else caused the problem and you could have handled it yourself but you chose to get professional advice to resolve the problem. So you should pay tax, right? Or should you? Is it in society’s best interest to compound the misery of a problem you didn’t cause by adding sales tax to it? Doesn’t that burden those least able to pay it, at a time they’re already in distress? Is that really the smartest place to raise state-wide revenue?

    That’s what the Bar Association is asking. It’s not a ridiculous question.


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