Posted by Jonathan Adler:
A Tax Break for Trial Lawyers?
http://volokh.com/archives/archive_2009_07_26-2009_08_01.shtml#1248992400
[1]Walter Olson notes that some folks in Congress are pushing a tax
break for trial lawyers. Specifically, the proposal would enable
plaintiffs' lawyers to deduct loans to clients to cover litigation
expenses as made, rather than at the conclusion of the litigation. The
estimated value of the tax code revision is $1.6 billion. Yet Victor
Schwartz (among other things general counsel of the American Tort
Reform Association) and Christopher Appel [2]argue the revision could
have broader implications:
Those who practice plaintiffs� lawyer work learn quickly that it is
a business similar to other capital businesses. Capital is placed
at risk and a judgment is made whether or not it will bring a
profit. Today the costs of litigation act as a curb against
marginal and frivolous litigation. This is what makes the
plaintiffs� lawyers� tax proposal of such great practical
importance. While one cannot calculate it mathematically, having
the federal government bear 40% of the initial costs allows
plaintiff�s attorneys to take more cases with higher risks. The
result to industries targeted by plaintiffs� lawyers will be
staggering.
Schwartz and Appel also challenge the argument that this reform would
simply treat plaintiffs' attorneys' business expenses like those of
other small businesses.
References
1. http://www.pointoflaw.com/archives/2009/07/aaj-looking-to.php
2. http://www.wlf.org/upload/5-22-09SchwartzApel_LegalOpinionLetter.pdf
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