This strikes me as unwise

I think reforming the tax code should happen and I think most services should be taxed, but it seems neither doctors services nor lawyers services should be part of the tax code reforms. Already doctors and lawyers have enough trouble collecting bills, particularly from the poor. And while that applies to many, it seems the services of doctors and lawyers are important and frequently necessary.

ALONG WITH HOURLY RATES and hours billed, lawyers may soon have to add another column to their clients’ receipts—one to show the state sales tax.

House Speaker Glenn Richardson, R- Hiram, and his allies plan to push in next year’s legislative session changes that would levy sales taxes, for the first time in Georgia, on professional-service providers—from barbers and landscapers to accountants and lawyers.

The rate would be the current sales-tax rate, which varies by local government, although the details of Richardson’s proposal could change before the General Assembly debates it next year.

I could be convinced. But having been a lawyer, trying to collect on things, I think it could become problematic.

I will say this — it might be viable if you exempt contingent fee cases, which are most often personal injury cases, workers comp cases for what I hope is an obvious reason, and child custody cases. Or, make the loser pay everyone’s sales tax. My gut reaction, though, is that this could become extreme problematic.

28 comments

  1. Doug Deal says:

    What about the commission paid to Real Estate brokers, will that be taxed?

    I work for a purely service industry as well (computer software development) and previously worked in a purely service industry (chemical engineering consulting). Why should lawyers and doctor be exempt, if we/they are not?

    All taxes suck for somebody. Trying to make it more acceptable to certain classes, while not affording that accomodation to others makes them unfair.

  2. Contrarianistic says:

    I also provide computer software services. If having trouble collecting on services is the qualification, I’m exempt.

  3. Erick,
    You better start building those gated communities because it’s the only place you are going to be safe from those “poor & mentally ill people” in the streets who want to tax the poor lawyers & doctors.
    Victor Jones
    Macon, Georgia

  4. Know Nothing says:

    jsm,

    I am also insulted when I am taxed for food also, or for that matter, any other necessity of life.

  5. Darth Mike says:

    Victor, It is not the the docs and the lawyers that will be taxed. It is you. Do you really believe for one moment that an attorney will pay the tax out of his pocket? Not a chance. It is the poor people who utilize the service of a professional that will pay the tax. As a criminal defense attorney and a civil trial attorney, I can tell you that the majority of people that need the most help are the poorest in society. Now, the legislature would propose to tax those people.

    I can also tell you that there are many people that need a good lawyer that are streching themselves thin to pay for one. Adding taxes on top of that will only serve to increase the liklihood that the person will not retain an attorney which will affect their chances in court.
    I have seen firsthand that the rights of many people are trampled on due to their own ignorance of the law. Having an attorney is vital for anyone charged with a crime.

    The people who do not work can get a court appointed (free) lawyer. However, if you work at a minimum wage job, you make too much money to qualify for a court appointed lawyer. This means that you have to hire one. Now, if you are making minimum wage, it will be very hard for you to gather up enough money to hire a lawyer. By supporting the tax that the people will pay, you would make it even harder for the poor and the oppressed to retain a lawyer.

    Now, you and I may disagree with this, but I personally believe that the poor and the oppressed should not have yet another hurdle presented to them in order to protect their Constitutional rights.

    Now, one could always argue that I should lower my fees so as to accomodate the tax. However, that will not happen. If you cannot pay me, then I will not work for you. I will refuse to pay the tax to get someone to hire me. To do that is similar to asking Publix to lower their prices so that in effect, Publix pays my sales tax. A reasonable person would never dream of doing that. Similarily, it should not be expected that doctor’s and lawyers and other professionals should lower their prices.

  6. Doug Deal says:

    Darth,

    Then obviously Lawyers need to be regulated, and billing rates set to $40/hr, instead of 300-400/hr, since you admit that they are unwilling to lower them themselves.

    Why are you trying to profit on the unfortunate poor victims who are only trying to protect their Constitutional rights.

    Database applications can really help small businesses, many of which hire the working poor. Why should people pay taxes on my services when it will just mean fewer jobs for societies least well to do.

    I guess we all can play this game, Darth.

  7. Darth Mike says:

    Doug, one reason that lawyers should not be subject to the whims of the legislature is that the Georgia Constitution allows only the Supreme Court of Georgia to regulate attorneys. This new tax is an infringement upon the constitutionally protected domain of the Supreme Court.

    Also, anything that affects the accessibility to hiring an attorney infringes on a person’s Constitutional rights to an attorney.

    Also, a tax on attorney services will affect the poor and the downtrodden the most. It will be the final nail in the coffin of (to use Victor’s language) the “poor & mentally ill people” being able to retain an attorney.

    Lets be clear what is at stake. It is not a tax on attorneys. We already have one called the income tax. What we are talking about is:

    1) yet another sales tax;

    2) on services which the vast majority of states do not tax (I believe 46 of the states do not tax services);

    3) which will be paid for by the people that use the service (like any sales tax is).

    Do we really want to make it even harder for people to hire an attorney (or a doctor)?

  8. Dear Michael,

    You are preaching to the choir here. Buck Melton Jr reminded me last Friday that my Dad was one of the Key Players in originally setting up and guiding the indigent care fund in the State of Georgia.

    Right before Dad passed away in 1984, he said he could not recommend a young man to pursue a career in law, as it had been so overtaken with greed. Consider the times in 1984 and consider the times today.

    The ATL law offices are like Hideous Gold Plated Palaces, they could all move to Macon, pay 1/4 of the rent and give the rest to indigent patient & defense work.

    Watch the ongoing Federal Investigation of Georgia’s Mental Health System & our streets fill up with Mentally Ill from Governor Purdue & DHR Chair BJ Walker’s cutbacks at the DHR.

    Nice chatting with you,

    Victor Jones
    Macon, Georgia USA
    p.s. oh & after reviewing your website, my current views on DUI law enforcement:
    http://www.flickr.com/photos/georgiaimproper/page3/
    and
    http://www.flickr.com/photos/georgiaimproper/sets/72157600313059718

    p.p.s. remind me to tell you a few local dui stories when i get down your way.

  9. Darth Mike says:

    Doug, I try to profit in my business for the same reason as anyone else who wakes up in the morning and goes to work. To earn a living to support my family.

    Also, it is well settled law in Georgia that the legislature has no power to regulate attorneys. Due to the Georgia Constitution, only the Supreme Court of Georgia can regulate lawyers.

    Now, I may just be old fashioned in my belief, but I just do not believe that the government has the power to declare a maximum wage that a person can earn. To me, it reeks of either facism or communism. I believe that each person should be able to earn what they can. We may disagree on this point, but I love a little thing called FREEDOM.

  10. Adam Smith says:

    I would just simply add that a lawyer’s wages are set in the same manner as most other wages are set.

    Supply and demand in a free market will set the wages. If there is a limited supply for the services of an attorney, and there is a demand for an attorney, then the price for the attorney will be high. (For an individual attorney with what they ahave to offer, the supply is very limited as not all attorneys are equal. Some charge $50 an hour, and are barely worth that, some charge $500 an hour and are worth every penny. You get what you pay for)

    If there is a large supply of a service, such as auto mechanics, and the demand is not as high, then the wages will be lower. (And again, some mechanics are worth $30 an hour and some are worth $5 an hour. You again get what you pay for.)

    I do not believe anyone who comes to this website would advocate a plan where the government sets all the wages for the people. That was already tried in the Soviet Union and it failed.

    I would simply state, may each person earn as much as the free market will allow. May the government limit the tax burden to only what is truly necessary.

  11. Bill Simon says:

    Know Nothing,

    Life sucks with all these damn taxes, doesn’t it?

    If you wanted to buy a gun to end it all, you’d have to pay a sales tax on that, even though the Constitution grants you the “right to bear arms.”

  12. Federalist says:

    guns are not for revolution bill. We have a civil society that can revolt with the law and popular will. (i.e. the amendment process or elections). guns are for protecting private property.

  13. Doug Deal says:

    Adam,

    Do you actually read the posts that you reply to first, or just find “keywords” and assume you know the gist.

    As a remedial excercise, read my post again, and see if I intend there to be an actual proposal to regulate attourney’s fees, or was I pointing out the hypocracy in which Darth Mike’s post is steeped.

  14. Doug Deal says:

    Darth,

    You are the one that is making the claim that your profession should be exempt from the same regulations as any other service field. I was giving counter arguments that other professions could make identical claims

    My main point is that the biggest obstacle to obtaining legal services is the prices for the services, not a relatively insignificant tax. In any event the right to an attorney claim is specious because you are only guaranteed a right to legal counsel in the case of criminal proceedings and states provide the indigent with a free attorney. If you can afford to pay for your own attorney, then you can also pay the same tax that would be assessed on engineers, computer programmers and other service employees.

  15. Federalist says:

    Well, the public defender system is completely broken. C. Justice Roberts wrote a paper on this a while back. You do make a good point about the ability to pay the tax if you can afford an attorney, but this tax is unjust. I am not an attorney, but many of my friends are…and this is one of the big flaws with the “fair” tax. Doctors, lawyers, auto mechanics, etc, already pay income taxes…their services should not be given an additional sales tax because Richardson does not get campaign contributions from them…oops.

  16. Doug Deal says:

    Fed,

    I am neither for or against the tax, I am just against unequal enforcement of it, loaded with exceptions for special classes.

    I have a hard time supporting taxes on any service, but find it amusing that lawyers will support it as long it is everyone else and not them that have to pay it.

    In the end, we would not need new ways of collecting greater revenue, if people would just say no to larger government.

  17. tribalecho says:

    Sales taxes are regressive. Lawyer, doctor, or a zillion one or three people small businesses who will now be responsible for yet another hoop.

    The whole point is to axe a progressive income tax. It won’t simplify anything.

    BTW, did Glenn mention taxing our brokerage transactions? At least that would be one big easy fish to catch. Sorta doubt it.

  18. IndyInjun says:

    http://www.legis.ga.gov/legis/2007_08/fulltext/hr900.htm

    This is the link to the Georgia Fair Tax bill that Richardson introduced, which calls for a VALUED ADDED TAX on services.

    Erick, it would seem that the difficulty you see in collecting a 7% sales tax by attorneys should give real pause WHEN ADDED TO the 30% Fair????tax of Linders.

    I would really like to see discussion of HR900. I see NO WAY the locals go along with THAT.

  19. IndyInjun says:

    OK, I see that HR900 is being rewritten.

    Shucks, I was having great fun alarming county commissioners with that baby…….not to mention talking of retirement parties for the tax commissioner and tax assessors.

    It was ONE NUTTY proposal, that one.

    Embarrassingly so.

  20. Samuel says:

    Will those “Asian Massage Parlors” have to collect sales tax too?

    No complaints paying there?

  21. Mike,

    But before taxing the Docs & Lawyers, i’d suggest revisiting the way that Video Poker Machines are taxed or not taxed in Georgia. Some estimates say we are missing $60 million in tax revenue by using the current, antiquated method.

    And don’t forget to pat the hat of the middle Ga Legislator who led the effort to bring Video Poker back to every joint in between and on every corner in Georgia.

    Victor Jones
    Macon, Georgia

  22. HeartofGa says:

    If Richardson is successful in passing this legislation, it just might be the death of the Republican party in Georgia. Both professionals (of whatever profession) and consumers are going to hate it. Watch the Medical Association of Georgia and the State Bar, along with a long list of other professional organizations, collaborate to call for the heads of legislators who support this nonsense.

    I have raised these points before, but, consider these issues:

    1) If an attorney practices in an area like Social Security or Worker’s Comp where fees are set by state or federal law and are limited to a portion of the back benefit, then who pays the tax? I don’t think that the Feds would allow collection of the tax over and above the set fee from the client, so if this legislation passes, then the lawyer is out of pocket. That would be like the gorcery store paying the sales tax for customers- hardly fair.

    2) Medical professionals face some interesting issues. We are not allowed to simply stop treating a patient because they don’t pay us. Plus, while my hourly rate might be, say $100, I have negotiated contracts with various insurance companies that reduce the amount charged and establish the co-pay for the patient. So, if I have a patient, and the charge for the session is $100, but the insurance company is going to only pay $52.00, and the patient’s co-pay is $15.00, then what is the sales tax calculated on: the full charge, the amount paid by the insurance company or the patient’s co-pay? And, who do I collect from: the patient or the insurance company?

    Sure, I’ll send that bill for sales tax right along to Blue Cross.

    Here’s the deal. While most of us would not think of going to the gorcery, gas station or even to the hairdresser and taking the product or service and then not paying, it is not uncommon for a patient to walk out of a doctor’s office and not be prepared to pay. Lawyers face similar issues. At least for real estate agents the commission and taxes are generally settled at closing. That’s not the case for us.

  23. I don’t think adding taxes on lawyer’s and doctor’s services are going to affect the poor, because the poor can’t afford those services anyway. You can’t pay taxes on something you can’t afford to purchase.

    I wonder how many lawyers and doctors will choose to find new professions because the middle class won’t be able to afford the services and will have to join the poor in avoiding the services in the first place.

    My case is very expensive (for the defendants because they have lawyers) but for me, it’s cheap. A lawyer would charge me $280 for a one page document (I got a quote) and I did it for free. Of course, I wouldn’t try to be my own doctor..lol

    Anyway, I have three lawsuits right now and I can’t even imagine how much it would cost if I had to hire legal services, let alone pay taxes on top of their expensive costs. I’m not diputing the expensive prices lawyers charge. I agree people should make what they can and as long as there are people willing to pay the high prices, then there will be high prices.

    I long for the day when legal services become so oversaturated (like computer parts) that they are forced to bring down their prices in order to stay in business. No flames from lawyers please. You are no more educated than a programmer who went to college for their industry. So, you’re smart in your field. Others are smart in their fields too, it’s just that we don’t have the courts protecting a monopoly in other fields, whereas you guys have a legal monopoloy and I hope someone treats it as just that some day…a monopoly..and breaks up your little ring.

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