Contact Tralle Law
612-787-2553 claire (AT) trallelaw.com

Proposed Tax on Legal Services

February 14, 2013

About a month ago Gov. Dayton proposed his budget for the state. In his budget he proposed a series of tax changes, including a proposed tax on legal services. For the most part I am not opposed to increased taxation. Taxes are what pay for our roads, police/ambulance/fire departments, schools, parks, public libraries, and many other valuable public services. Full disclosure: I am married to a public school teacher, so I experience first-hand the value of state taxation. That said, I ardently oppose this tax.

The problem with taxing legal services is that so many people already struggle to be able to afford an attorney. While there is a constitutional right to an attorney in a criminal case (let’s not even begin the debate of public defender availability and budgets); there is no such protection in civil cases.

There are thousands of Minnesotans who do not – cannot – pay for an attorney for their divorce, custody, landlord-tenant, real estate, or employment case. Certainly for the areas of law that allow for contingency-based fees there may be more access to justice (i.e. representation by an attorney, guidance through the legal system, knowledge and empowerment), but in some civil cases attorneys are prohibited from accepting contingency-based fees and low-income clients are out of luck.

What about legal aid, you ask? Certainly legal aid and other non-profit groups can help a portion of the low-income clients, but only a small portion. Most must either find an attorney willing to offer free (pro bono) representation or sliding-fee representation. Or, they simply do not hire an attorney. The majority of low-income clients fall into the latter category.

In response to Gov. Dayton’s proposed tax, the Hennepin County Bar Associate (HCBA) released a press release. The HCBA does not support this tax and the press release reflects my own concerns: further problems with low-income client’s ability to gain representation. Click HERE to see HCBA’s press release.

The Star Tribune also wrote an article in their business section. Their article did not reflect the access to justice issue, but rather the other side of the coin: will large law firms leave Minnesota in search of states without the tax? Currently, three other states do impose a legal-services tax: South Dakota, Hawaii, and New Mexico. This is certainly another worry with the proposed tax. Click HERE to read the Star Tribune article.

What do I think will happen? I do not think this tax will pass in the eventual Minnesota state budget. I think there are enough groups who are powerful and influential enough to make sure the tax does not pass. Rather, I think this is a creative option to the question: where else can we find revenue?