Examiner Editorial: No special tax cuts for wealthy trial lawyers 

Facing criticism over massive deficits, President Barack Obama is in no mood to give anyone a tax cut. He’s eager to let President George W. Bush’s tax cuts expire, and he’s blown off his promise not to raise taxes on families making less than $250,000 a year with his tax-hiking health plan and cap-and-trade scheme.

Wealthy trial lawyers, however, may be a different story: Obama is on the verge of giving them a special interest tax break worth $1.6 billion. Legal Newsline reported yesterday that John Bowman, top lobbyist for the American Association for Justice, told a private briefing that Obama’s Internal Revenue Service will soon unilaterally cut their taxes without congressional approval.

The tax break would allow plaintiffs’ attorneys to deduct litigation costs in the same year that they bring contingency lawsuits. Currently, such costs are considered loans to clients, deductible only if and when a case is lost. The loan arrangement exists because most states consider it unethical or even illegal for lawyers to fund their clients’ lawsuits directly.

Last year, the group’s then-chief lobbyist (and now CEO) Linda Lipsen said Democrats in Congress might push the provision through by sneaking it into unrelated legislation. This already-underhanded strategy appears to have failed, and so a supportive Obama administration may simply bypass Congress. It is unconscionable that “spread-the-wealth” Obama should force taxpaying plumbers, waiters and bus drivers across America to shoulder up to 40 percent of the cost of wealthy trial lawyers’ litigation with this tax break. Worse, the tax break provides an effective reduction in lawsuit expenses, freeing up lawyers to file more suits that have less probability of success.

Obama has already given trial lawyers an executive order preventing federal regulations that pre-empt state lawsuits, as well as favorable new laws to increase their business. The current financial reform bill, for example, allows state attorneys general to deputize treasure-seeking trial lawyers to sue under its titles and keep the spoils. But this tax change could be the most odious favor yet to this overwhelmingly Democratic donor group — an insult at a time when small businesses struggle under soon-to-increase tax burdens and prepare to make cutbacks because of the added costs of Obamacare.

The White House declined comment on this issue, referring us instead to the Treasury Department, which also declined comment. But the White House must answer for its actions. Does AAJ, whose top lobbyists have visited the White House at least 13 times since Obama’s inauguration, own this “lobbyist-free” administration?

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Staff Report

Staff Report

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A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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