COMMENTS OF SCOTT F. COOPER,
PHILADELPHIA BAR ASSOCIATION,
OPPOSING SALES TAX ON LEGAL SERVICES
Tuesday, May 11, 2010
Thank the Senators for convening these important discussions
I represent the 13,000 members of the Philadelphia Bar Association
We are delighted to be here to lend our voice in opposition to the possible imposition of a sales tax on legal services
Since hours after the Governor announced this might be included in the proposal for revenue our Association, and many others quickly spoke out against it.
I have personally authored multiple letters to editors on this topic, spoken on television against it and have briefed the Bar Association many times on the dangers of such a tax
First, this is not a tax on attorneys or the providers of legal services.
As most will share with you, this will be a tax passed on directly to the consumer.
As with all sales taxes, this will be regressive, hitting those who can least afford it the hardest.
But we have specific points that we want to have considered in this debate as the Commonwealth struggles to balance its budget.
First, those who need legal services are already in an extremely vulnerable position. By the time someone seeks an attorney, they are already in a very difficult position:
a family is strained,
a child may be in jeopardy in school,
someone may have been arrested,
there may be allegations of discrimination in housing or the workplace or
a business may be facing financial disaster with creditors a governmental unit or improper competition
In short, these are not the types of services for which consumers enjoy having to purchase.
Second, those involved in the legal system already pay for such services in the form of court filings and related fees. In our view, this is nothing more than double taxation on those citizens that need access to the judicial system.
Access to our courts must never hinge on whether someone can afford to pay the sales tax on the legal service to get there.
Third, jobs literally hang in the balance.
Presently, there is no sales tax in any of the states that directly compete with Pennsylvania for legal services. If this tax goes through, those consumers who can buy legal services from New York or New Jersey will do so.
Philadelphia law firms presently enjoy a rate advantage over similar firms in New York and
Washington, D.C. For those clients who can shift legal services, they will move the work out of the state.
Then this does become an issue of declining employment, reduced rental rates and possible layoffs of lawyers and non-lawyers alike.
This obviously leads to reduced income taxes, wage taxes here in Philadelphia and business privilege taxes.
Moreover, as the sales tax would automatically bring with it the added sales tax from Philadelphia, there could be significant harm.
We in the legal community recognize that the budget must be balanced. But this particular tax will balance it on the backs of those who can least afford it and those who are already greatly at risk.
No one wants increased taxes, but the clients who will bear the brunt of this are the ones who
least should be hurt. Moreover, many will not realize this tax exists until it is too late.
For the commercial purchasers of legal services, we fear they will simply direct their legal work outside the Commonwealth and certainly outside of Philadelphia.