California Keen on Taxing Lawyers?

Facing a $16 billion budget deficit, the state government of California is considering plans to “close tax loopholes” by monitoring how much money it loses from tax exemptions. The state is also looking at other ways on how to address the deficit without resorting to drastic measures like a cut on education or raising taxes.

In a budget forum held at Pleasant Hill recently, Governor Arnold Schwarzenegger told the audience that this plan includes the proper collection of sales tax on professional services – including legal services.

"We have to look at the way we are taxing," Schwarzenegger was quoted as saying. "There are whole new economies that are developing, service-oriented economies."

Finance department spokesperson H.D. Palmer, however, commented that the governor was just explaining some of the “deficit-eliminating ideas out there”.

"Basically, it was in the context of we ought to have everything on the table as we ought to be having discussions about them sooner rather than later," Palmer stressed. "But we're not carrying a bill in our back pocket, if that's what you're asking."

The Department of Finance reported that in 2007-08, state and local coffers have lost about $6 billion if California had allowed sales taxes on food. The treasurer’s office also estimated that the state could reap more than $10 billion from a tax on "construction and professional services."

Reports said the concept of taxing lawyers through their legal services is not a new idea. Jeffrey Bleich, president of the State Bar, said the notion of taxing professionals was even considered in 2003 but dropped during the time he still led the San Francisco Bar Association.

When asked by reporters how serious he is about the idea, Governor Schwarzenegger said that he hears many budget-balancing proposals "and I just throw it out there."