Rebuttal on the Trial Lawyer Deduction

Following the argument of reader Bob Stone, a trial lawyer blog makes a strong pitch that the Obama deduction for his up-front expenses—criticized in Ethics Alarms—in contingency fee cases is reasonable and fair, because other small businesses can deduct similar expenses.

It’s a valid argument. I think what trial lawyers pay up front in contingent fee cases is more like an investment (or a wager), but regarding the expenditures as pure business expenses is fair and reasonable. However, a period in which a nation desperately needs to close the gap between expenditures and revenues, and is about to end other deductions (such as, quite possibly, the deduction on charitable giving) while vastly increasing taxes that will affect all Americans, is very strange, one might even say irresponsible, time to decide to add a deduction for a wealthy profession, however justifiable in theory.

The fact that the deduction can be defended doesn’t change the fact that it is a pay-off to one of the most generous and richest of Democratic constituencies, nicely complimenting the Democrats’ inexcusable failure to include any kind of controls on medical malpractice jury awards in the health care bill, at a time when the country can’t afford pay-offs. The trial lawyers could have endured their anomalous tax treatment a little longer.

That’s what’ wrong with the new deduction.

5 thoughts on “Rebuttal on the Trial Lawyer Deduction

  1. You’re right about trial lawyers and the Dems’ pandering to them. And you’re right that the argument for deductible expenses is fair. And you’re right that it would feel good to stick it to them. But that still isn’t right to use the tax code to punish people we don’t like (but who the Dems do).

    • But I DO like them, or many of them. I like a lot of the groups that are going to get hit with huge tax increases too. The point is that an existing non-deduction that has been around forever without stifling an obviously successful profession is about as low fruit as there is in a fiscal crunch—why lower their taxes while everyone else’s are being raised? It makes no sense…except as a pay-off.

  2. I see your point, if it really was the way that all of the critics were looking at the issue. There is the fight over the Inheritance tax, the bank bailouts , the wall street handouts, and the roll back of tax giveaways to the rich for the past 8 years. Are you consistent with all of those? Are the other critics?
    This should have been done long ago, and was stopped more by groups that hate trial lawyers and is an issue that is still attacked viciously by the same groups.
    Funny, how many business people are opposed to others making money and usually shout on high about cutting taxes.

    • I don’t have to be “consistent” with all of them—they are all different. I think the estate tax is robbery plain and simpe: the income has been taxed onnce, and if parents save to pass an estate to their kids, the government has no right to it. I don’t think the tax cuts of the Bush years were “giveaways”—they did earn the money, after all—I just think they were dumb and irresponsible when there were wars to pay for. The bail-outs? Ridiculous.

      Gee—does that qualify me to find a sudden break for a wealthy profession hypocritical when we’ll be cutting the tax break for donations to the Little Sisters of the Poor to close the deficit? I await your verdict breathlessly.

  3. Pingback: Articles » Blog Archive » Tax Reduction Tips

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