MINNEAPOLIS (01-22-2013): -- Today, in response to the budget proposed by Gov. Mark Dayton, Hennepin County Bar Association President Tom Jensen (of Lind, Jensen, Sullivan & Peterson) spoke out against the provision of the governor’s budget that would create a new tax on legal services.
“While we respect the governor’s effort in putting forth this budget in very difficult financial circumstances, adding a new tax on legal services is simply bad policy. This part of the budget solution needs to move in a different direction. It runs counter to the state’s obligation to ensure access to justice. It’s a big reason why the idea of taxing legal services has been overwhelmingly rejected by 47 other states.” Only Hawaii, New Mexico, and South Dakota currently tax legal services; they are low-population states with relatively small economic output, unlike Minnesota. Also, Florida and Massachusetts repealed such taxes soon after they went into effect after it was clear that the complexity and burden created was too great.
Jensen expressed particular concern related to the Fourth District Court – the state’s largest court district where the majority of Minnesota cases are filed and heard.
“Gaining access to justice in Hennepin County is already difficult for many residents, notwithstanding the hard work of the judges. The courts have been underfunded and overburdened for years, and Legal Aid and other civil legal services providers took a big hit in the last budget. While the governor’s new budget starts to move in the right direction in terms of more funding for the legal system, and we are grateful for that, this sales tax would add another barrier to gaining access to justice. Making the cost of seeking justice more expensive is not the solution – it just makes the problem worse. The fact is that it wouldn’t be lawyers paying this tax; it would be tacked on to the bill that clients pay.
“Our Hennepin County judges have higher caseloads than trial judges in surrounding states. Their burden will be greater when more citizens choose to represent themselves in court. A tax on legal services will undoubtedly lead to more of these ‘pro se’ cases where individuals don’t know how best to represent their own interests and don’t understand the court process. The more pro se cases are filed, the more slowly the wheels of justice turn for the public as a whole.”
There are many common situations in which Hennepin County residents find themselves where legal representation is needed – situations that would be made more expensive by adding a tax on legal services, often during times of personal, family, or business hardship.
“This really would be a tax on misery. If you’re trying to get out of a terrible marriage, should you be taxed for your divorce? Should someone who is severely injured from an accident have to forfeit a portion of the life care recovery to pay a tax? Will seniors who are trying to be thoughtful in putting their affairs in order be forced to pay a tax on a will? What if you get sued for something you didn’t do, and then you have to pay a tax on defending yourself? It adds insult to injury and is simply unfair.”
Regarding new taxes on the legal services that are provided to businesses, Jensen expressed concerns about competitiveness and noted the portability of legal services. “In that we are only 30 miles from Wisconsin, there’s a strong reason to believe that Hennepin County law firms will lose business to firms across the border regardless of how carefully the law is written. We should keep those dollars in Minnesota. Small law firms – the small businesses within the legal community, which are a growing percentage of our membership – would be particularly hard hit.
“Hennepin County businesses are the economic engine of Minnesota. Let’s not create disincentives to building a new plant here – which requires real estate, regulatory, and labor counsel – in favor of locations 30 miles away. If this new proposal is enacted, many businesses will start looking to out-of-state law firms to try to avoid the tax. Small businesses also stand to lose with this proposal – unlike large corporations, small businesses would be in a more difficult position to hire in-house attorneys to avoid this new tax.”
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