Ohio Governor John Kasich’s budget proposal for 2014 includes an expansion of the state sales tax to legal services, among several others services. I, along with many other legal professionals throughout the state, feel that applying a sales tax to legal services is a bad idea and should be opposed.
Kasich’s proposed budget involves lowering the state sales tax to 5% from its previous 5.5%, but it broadens the tax base by making services subject to the sales tax. Kasich believes this will generate the revenues needed to close Ohio’s deficit. I do not comment on political issues in this blog or in Zimmer Law Firm newsletters. Rather, my opposition is solely based on the merits (or lack thereof) of the proposal itself.
I agree with the public position taken by the Ohio State Bar Association and the Cincinnati Bar Association against a sales tax on legal services. As the CBA notes in its press release, “Forty-seven states do not tax legal services, and two that have adopted a tax in the past, Michigan and Florida, have repealed it due to numerous problems and issues.”
A sales tax on legal services will dampen economic activity in Ohio, and unfairly force many Ohioans to bear added costs for basic legal services that are a necessity and not an expenditure they choose to make. As the CBA points out in its public statement, “Legal services are critical to maintaining the life many people know and need. They are not discretionary, they are mandatory.”
Clients come to me for help with the estate planning process. Whether they need assistance creating wills or trusts, settling the estates their deceased family members, or simply practical guidance through the many legal issues that come with planning an estate, my clients usually have a deeply personal stake in the proceedings. I assist working families trying to keep their small businesses, ranches, or farms alive from one generation to the next. Others who walk through my door are charged with the tasks of caring for an incapacitated loved one and managing his or her legal and financial affairs. More still must confront the details of end-of-life planning, either for themselves or a family member. Each of my clients’ personal situations comes with its own set of practical and emotional challenges. Finding solutions to these issues should not be burdened with a sales tax, as if their need for legal counsel were tantamount to a purchase made at a shopping mall.
In other cases, access to legal services becomes a matter of personal security. Families and individuals may have to defend foreclosure proceedings on their home resulting from financial hardship or unemployment. An individual may need to file a restraining order to keep away an abusive spouse. Others are forced to file divorce proceedings. There are countless others for whom a sales tax would impair access to justice, such as those needing defense of criminal charges against themselves or a loved one. The list is endless – adoptions, buying or selling a home, starting a business, Medicaid planning, and so on.
A sales tax on legal services would effectively trivialize many Ohioans’ personal difficulties, and would discourage people from seeking legal help for important problems. The state’s need to create additional revenue does not justify burdening the cost of legal services, which are often a high budget item for consumers in the first place. It is illogical to treat legal services, which are fundamentally necessary (and sometimes an involuntary need) for countless individuals in a variety of situations, the same as sale of voluntarily-purchased consumer goods and services by making them taxable. Let’s make no mistake about it – a sales tax on legal services is a tax on clients, not the lawyers, which increases the cost of consumers to protect their legal rights and the costs of businesses operating in Ohio. As both the OSBA and the CBA point out, such costs could drive businesses to relocate in any of the 47 states that don’t have a sales tax on legal services, including Kentucky and Indiana, thus hurting the Ohio economy and costing jobs at a time when our economy can hardly afford such a risk.
Although I agree with Governor Kasich’s goal of fostering job growth in Ohio and decreasing the deficit, taxing legal services is not realistic and would cost jobs. A sales tax on legal services will only make it more difficult for Ohioans to manage their personal and professional affairs, and it will interfere with my law firm’s goal of helping clients protect and preserve their accomplishments. It’s a bad idea from the start, and ignores the bad experiences other states have had with the idea. Contact your state legislators and express your opposition today.