For background, Governor Rauner's 2014 campaign proposed a service tax that included a tax on legal services. This part of his plan accounted for one-quarter of the $577 million that was estimated to be generated by this tax. This is to address the estimated $8.5 billion in unpaid bills at the end of the calendar year.
We're linking to a recent joint study by the Taxpayers Federation of Illinois and the Center for Tax and Budget Accountability and an article in State Tax Notes. The joint study recommends against imposing a service tax on professional services (page 9) but does recommend an expansion of Illinois' sales tax base. The article, entitled "Taxing Services is No Panacea" by Brian Hamer, is a concise four-page discussion of the service tax issue.
The Illinois State Bar Association is opposed to this regressive tax on our clients who hire lawyers to exercise their rights under law.
It's not a discretionary consumer purchase such as grooming your dog, using a travel agent, or dry-cleaning. Many of our clients are people of modest means who must hire counsel to seek delinquent child support or custody of their children or request a guardianship for a sick, elderly parent.
Such a tax will also disproportionately affect small businesses in which legal services are an ordinary and necessary part of starting and maintaining such a business. They compete with large corporations who will have in-house legal staff that won't be subject to this kind of tax.
A tax on professional services is also a difficult tax to administer and enforce, and one of the reasons why none of our neighboring states tax professional services.
Your legislators may be found at this link of the General Assembly's homepage or at the State directory at 217-782-2000.