As state budgets are being worked out with red pencils, an idea floated in Connecticut to help spread the pain is a tax on legal fees.  Not surprisingly, Norm Pattis is less than ecstatic, according to his Connecticut Law Tribune editorial.

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 2 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 2 percent, I’d better raise them some to account for additional time and expense of compliance. Add another 2 percent, or make it now $10,400. But that’s an awkward 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. 

While certainly true, I suspect there will be some other issues as well.  We all know how happy criminal defendants are to pay legal fees, and how they are inclined to make payments subsequent to the initial retainer.  Certainly adding a few points to this will have no consequence.

We all know that defendants feel that retaining private defense counsel is so much more effective than being represented by a public defender or indigent defender, so by increasing the cost of doing so, there will be no impact on the number of defendants who elect to forgo a private lawyer and enjoy the largess of the state.  Certainly, public defenders have plenty of room on their plate for yet another round of defendants in need of their services.

We all know that defendants have nothing to hide from the government, and are happy to have their lawyer affirmatively disclose to the government the amount of money paid for their legal defense.  After all, look how well Form 8300 has been received.  Certainly, defendants are proud of their earning power and tax compliance, and would enjoy nothing better than the state knowing as much about them as possible.

And criminal defense lawyers, already on the cusp of being perceived as a little too tight with the system, would gain the trust of their clients by acting as the collection agent of the tax man.

While legislators may wonder why lawyers, as opposed to those who make women’s dresses, should be immune from the pleasures of tax collection, there are some sound reasons to distinguish between the two.  It won’t work.  It will end up costing the state more money than it collects.  It will deny people the ability to retain counsel by increasing the cost of legal services.  It will compromise the attorney’s single-minded devotion to her client and make her part of the state evidence-gathering apparatus.

For most criminal defense lawyers, the cost of operating a law practice has increased, as has almost every cost for everyone else, while the ability to earn and collect legal fees has remained stagnant at best, and decline at worst.  Competition is rampant, and often turns on cost, since clients are frequently incapable of distinguishing lawyers on competence or service.

Lawyers aren’t unique in this regard.  Many, like health care providers, have watched their costs rise while earnings fall, for decades.  Or hedge fund managers, over the last month.  But facially appealing solutions aren’t always viable solutions, and this one will backfire big time.

Norm offers a radical solution to all of these issues for lawyers:

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.

His point, that even a well-heeled middle class family can be ruined by the cost of a criminal defense, especially galling when the defendant is innocent and spending his children’s college funds to fight spurious charges, is very well taken.  It’s not without problems, when criminal defense becomes dependent on state-love for its living (and hence existence), but neither is watching a nice family destroyed by the criminal justice system.