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Time for a Lawyers' Tea Party?

Vivia Chen

October 1, 2010

I've been expecting lawyers to be up in arms about Obama's tax plan. You know, the proposal to retire the Bush tax cut for the top 2.5 percent of taxpayers--those who make more than $250,000 (for families) and $200,000 (for individuals).

"The fact that families making $250,000 are sometimes being invoked in the same terms as billionaires is a symptom of one of the paradoxes of the American tax system: At the same time that wealth has become far more concentrated in recent decades, the tax code has become far less precise in differentiating levels of affluence," reports David Kockieniewski in The New York Times.

In the law firm world, many lawyers--especially those who live in the high-rent districts of Manhattan or Silicon Valley--would probably chuckle at the idea that they are now considered members of the rich. Some lawyers making two, or three or even four, times that threshold amount don't feel superprivileged. (Have you checked out the New York Times real estate ads recently? A one-bedroom apartment in Chelsea now runs in the seven figures. Now, imagine needing a three-bedroom apartment!)

But really, who's going to champion the lawyer class? So far, the only one who's made a plea for the working class of the upper class has been M. Todd Henderson, a law professor at the University of Chicago. He ranted about the proposed tax increases in a blog several weeks ago:

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels. . . ."

As both the NYT and Above the Law pointed out, he took down the post after he received lots of hostile replies. Henderson said in a post that he fell victim to an "electronic lynch mob." (By the way, we e-mailed and called Henderson, but he didn't respond.)

Poor professor Henderson. It's hard being the patron saint for lawyers. Perhaps he was a bit whiny in his post, but I get his point: Hardworking professionals who might be nominal millionaires shouldn't bear the same tax burden as those who have tens of millions of dollars or more.

So let me pick up where the good professor left off. Memo to the IRS: Hands off those lawyers--particularly those who slave long hours in ridiculously expensive cities, carry heavy mortgages, and pay hefty private school tuition (sometimes for three or four kids).

The idea that there should be a higher cutoff for what's considered the top tax bracket is not totally ludicrous. "One proposal being discussed is a millionaires' tax, which would create one or two additional tax brackets for the wealthiest Americans and eliminate the Bush tax cuts only for those who earn more than seven-figure incomes," says the NYT.

That seems pretty sensible. But may I suggest using the legal profession as the standard? How about using the average profits per partner in The Am Law 100 ($1.26 million)--as the cutoff for who should get the benefit of the tax cut extension? I mean, lawyers are just working stiffs, no?

Do you have topics you'd like to discuss or tips to share? E-mail The Careerist's chief blogger, Vivia Chen, at VChen@alm.com.


Illustrator: John Tenniel


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The problem is that neither party wants to make massive cuts whilst at the same timing admitting the need to raise taxes so the country is in trouble

Shawn Tully, a Fortune Magazine writer, coined the term HENRY (which stands for “high earners, not rich yet”) for household making $250K -$500K. A recent Harvard Business Review article stated that HENRYs often bear the highest effective tax rate. This is exactly John's point.

Shawn Tully's article as well as the HBR piece are worth a read. You can find their links in my blog post here. http://www.everysixminutes.com/2010/09/27/breaking-up-is-hard-to-do-part-v-money-money-money/

Agree with Aaron. The main problem is that the administration keeps calling people making over $250,000 the "richest" 1% (or 2% depending on who is speaking). That's just not true -- there is a big difference between the top 1-2% W2 wage earner and the top 1-2% richest americans. Unfortunately, lawyers in this range get soaked because they make a lot of money, but have less flexibility for tax strategies because it is a W2 wage.

So...let's have a higher tax for those making $10M and later, if we need to, we'll do the same for those making $1M, and later, if we need to, we'll do the same for those making $250,000 and so on...

"Hardworking professionals who might be nominal millionaires shouldn't bear the same tax burden as those who have tens of millions of dollars or more."

How about "Hardworking professionals who might be nominal millionaires shouldn't bear a significantly higher tax burden than those who have tens of millions of dollars and primarily derive their income from capital gains and dividends."?

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The Careerist takes an inside look at how lawyers shape their careers and manage their lives. The blog aims to dissect developments in the profession, provide useful information and advice, and give lawyers a platform to voice their views. The goal is to provide a fresh, provocative take on the state of lawyering.

About Vivia Chen

Vivia Chen

Vivia Chen, The Careerist's chief blogger, has been covering the business and culture of law firms for a decade. A former corporate lawyer, Chen is fascinated by those who thrive (as well as those who don't) in the legal profession. Her take: Success in the law (and life) doesn't always travel a linear path. If you have topics you'd like to discuss or information to share, contact her: VChen@alm.com

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