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March 15, 2019

Opponents take aim at Lamont's sales tax expansion plan

HBJ Photo | Joe Cooper Connecticut's Legislative Office Building.

Add the legal industry to the list of professional-service providers opposed to Gov. Ned Lamont’s pitch to dramatically broaden the state’s sales tax.

The Connecticut Council of Bar Presidents, including the presidents of the state’s 35-plus bar associations, on Thursday said it sent a letter to the governor making it clear they staunchly oppose his proposed 6.35 percent levy on legal services.

The letter coincides with its plan to lobby the state’s Finance, Revenue and Bonding Committee on Friday at the Legislative Office Building to vote against S.B. 877, a measure that would implement new revenues in Lamont’s budget. The committee is set to discuss the measure at 10:30 a.m., and could vote to move the proposal forward for consideration in the House and Senate.

The bar associations, representing 20,000 attorneys in the state, join the opposition first initiated by the accounting industry, which last month slammed Lamont’s budget proposal that aims to end sales tax exemptions for accounting, legal, interior design and real estate services.

According to the governor’s two-year, $43 billion state budget, consumers would need to pay the 6.35 percent sales tax for those professional services, in addition to consumer purchases like digital downloads for Netflix, to raise $292 million and $505 million, respectively, in new tax revenues over the next two fiscal years.

The sales tax expansion did exclude business-to-business transactions.

The Connecticut Bar Association (CBA) said its lawyers will pass along the cost of the new tax to clients if lawmakers adopt Lamont’s sales tax reform, which would increase legal fees and possibly give some people second thoughts about seeking legal representation.

And aside from firms losing business, the expanded “misery tax” would unjustly prevent more low- to moderate-income households from accessing legal services to seek justice, said CBA President Jonathan M. Shapiro, also a partner at the family owned Shapiro Law Offices LLC in Middletown.

Industry leaders argue the purchase of legal services is often a necessity, as potential clients face criminal charges, eviction, foreclosure, divorce, domestic violence, end-of-life care, death of a family member or bankruptcy, among other issues.

To avoid potentially mounting legal costs, people may opt to forego legal representation and represent themselves. Plus, a surge of people would be represented by the state through the Office of Public Defender Services, resulting in increased costs to the state.

“As a state, we should be doing everything we can to promote small businesses and retain jobs,” Shapiro said. “The proposed tax on legal services will make Connecticut less competitive, result in a decline in work for Connecticut lawyers and, in turn, a loss of jobs for Connecticut lawyers, support staff and support services.”

But Rob Blanchard, an aide to the governor, later Friday said expanding the state’s sales tax is meant to “level the playing field and create an equal tax treatment of both goods and numerous services.”

“Our state imposes a tax on public relations, lobbying and consulting -- so why should services in the state house be taxed but not in the court house?” Blanchard rebutted.

YMCA cries foul

S.B. 877 would also extend the sales tax to purchases for summer camps, sports programs and swim lessons.

The YMCA of Greater Hartford on Thursday said it’s sent a letter to the Finance, Revenue and Bonding Committee urging its members to oppose the measure because increased costs would discourage parents from enrolling their children in sports programs, which prevent childhood obesity, “life-saving” swim lessons and summer camps.

On Friday, the committee is also considering bills that would phase out Connecticut’s estate tax over the next five years, address property tax reform and adjust state bonds for capital improvements and transportation grants.

This story has been updated to include comment from Rob Blanchard

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