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No Joke: What's the Difference Between a Divorce and a Tatoo?

This blog post combines two posts from the SBM Blog and is the original content of the State Bar of Michigan.

As Michigan lawyers go about the work of convincing our state legislators that a tax on legal services would be a fundamental and costly mistake, we face the same response again and again:  "if we exempt one service we have to exempt them all."  In Georgia, policymakers are also gearing up for a tax on services, and a recent white paper from Georgia's venerable Tax Foundation asks: "Can anyone really keep a straight face while justifying a tax exemption for legal services, tattoos, haircuts, car repair,health club memberships and other common services?"  Well, we can.  In fact, we wonder how serious policymakers can keep a straight face equating legal services with personal grooming and adornment services.Bottom line: government shouldn't tax behavior that is good for society. We're all better off when people get the legal advice they need to secure justice or comply with the law.  Tatoos, not so much.

The original SBM Blog post, above, referenced a related post on the same subject, which is reproduced here for our readers convenient reference:

Unfair, Unwieldy, Unwise, Unethical, and Unconstitutional

The prospect of a Michigan tax on services that extends beyond the 26 services already taxed to include legal services is a growing threat, with a group of business leaders actively pushing the idea, legislation already introduced, and the Governor endorsing a services tax. The State Bar has successfully lobbied in the past against taxing legal services, arguing that a tax on legal services is unfair, unwieldy, unethical, unconstitutional, and, ultimately, unsuccessful. The constitutional problems with a tax on legal services are magnified when legal services to businesses are excluded, as is the case with several of the current proposals. See HB 5527, 5528, and 5529. If you haven’t expressed concern about a tax on legal services to your legislator, now’s the time.  Here’s how to connect.  Here’s the State Bar’s position.

Here's a quick rundown of the arguments.  A tax on legal services is...

Unfair – Most legal services are rendered in circumstances of crisis, stress, or misfortune. People who seek legal assistance in cases involving child support payments, child custody, divorce, death, domestic abuse, end-of-life decisions, or bankruptcy seek them out of necessity, not choice. For this reason, a tax on legal services is aptly labeled a  "misery tax".  

Unwieldy – Determining what fees and services would be subject to the tax and which records would or could be subject to audit would be an administrative nightmare. Among other reasons, attorneys often don't receive payment promptly from their clients, making it a potential administrative burden to reconcile payment with the tax obligation.  Administrative complications were one reason why the only two large states that have adopted such a tax – Florida and Massachusetts – repealed it shortly after it took effect. 

Unethical – Collection of a sales tax on legal services could compromise client confidentiality, imposing the state’s tax collection apparatus into the attorney-client relationship. Law firms do pay taxes under the Michigan Business Tax. 

Unwise – Individuals and businesses seek legal advice to ensure compliance with the law.  Such behavior should be encouraged, not taxed. Further, the tax could be counter-productive, causing clients to seek legal services outside Michigan for intellectual property, federal tax, estate planning, legal service, and encouraging law firms providing such services to relocate outside Michigan, or perform such services at satellite offices. Like medical services, legal services are not discretionary. Taxing legal services is taxing justice. 

Unconstitutional – In addition to constitutional concerns about attorney-client privilege and the taxation of criminal defense, the proposal to exempt one class of clients (business) from taxation while imposing the tax on another class (individuals) raises serious constitutional issues.

Unsuccessful - Two states, Florida and Massachusetts, enacted sales taxes on services but repealed the measures when they proved to be administratively difficult and unpopular.  In the three small states that are said to have a tax on legal services, two also tax physician services and the thrid reports that the tax is not enforced because it is so difficult to calculate and collect.


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UM Law School Challenges Constitutionality of Felony Child Support Statute

The mighty UM Law School has its hands all over the recent constitutional challenge to the felony child support statute.  The case was originally charged by UM Law Alumni and Michigan Attorney General Mike Cox.  The defendant-appellant in the case is represented by the Michigan Innocence Project, run out of the UM Law School by Professor David Moran.

The case, People vs Likine, was the subject of a one-day jury trial in the Oakland County Circuit Court back in November 2008.  Years earlier, Selesa Likine was ordered to pay child support for her three minor children pursuant to her divorce proceedings; also in Oakland County.  The criminal case against Likine charged that she fell behind on the support payments from 2005 through 2008, creating arrears in the amount of nearly fifty thousand dollars.

Ms Likine attempted to assert the defense of an "inability to pay" the support ordered by the family court.  She claimed disability via the Social Security Administration stemming from her diagnosis of Schizoaffective Disorder and Major Depressive Disorder.  Likine also asserted that she was unemployed due to a lengthily hospitalization at the beginning of the charging period.  She further claimed that her support obligation was erroneously calculated by the family court, as it was based on a "phantom" imputed income of $5000 per month; a wage she claims she never earned in her entire life.

The felony child support statute is one of strict liability.  The Michigan Court of Appeals ruled in a 2004 published case (People v Adams) that a defendant cannot assert a defense at trial of his or her, "inability to pay" the court-ordered child support.

Accordingly, in the Likine case, the Attorney General requested trial judge John McDonald to preclude Likine from introducing any of the above facts regarding her disability and resulting lack of income from jury consideration.  The AG's motion was granted based on the Court of Appeals' Adams ruling.

Just prior to the beginning of her criminal trial, Likine's attorney moved for reconsideration of Judge McDonald's evidentiary ruling; this time arguing that precluding her from presenting evidence of her "ability to pay" and of her employment history, violated Likine's constitutional Due Process rights under the 14th Amendment to the United States Constitution.  The motion was again denied.

Not surprisingly, Likine was convicted by the jury of failing to pay court-ordered child support and sentenced to one-year probation.  When the jury was deliberating her case, however, they sent out a note to Judge McDonald asking for information about Ms Likine's employment history.  Due to his earlier rulings in the case, Judge McDonald refused to answer the jury's query.

Following her jury trial, Likine secured appellate representation from UM's Professor Moran, who filed a motion for new trial; this time asserting that Likine's conviction violated the Michigan Constitution.  McDonald, stating that he sometimes disagreed with the Court of Appeals' Adams decision, nevertheless denied the motion.

In her appeal currently pending before the Michigan Court of Appeals, Likine relies on a Michigan Supreme  Court decision from 1889 which held that statutes cannot criminalize conduct which, through no fault of the defendant, is impossible to avoid.  Professor Moran asserts that such a criminal law lacks the requisite, "voluntary actus reus" (bad act).

Along the same lines, Professor Moran raises a claim of violation of federal Due Process under the U.S. Constitution.  In this fashion, Likine argues on appeal that the Court of Appeals' Adams decision wrongly eliminates the actus reus requirement of the felony child support statute, rendering it unconstitutional on its face.

In response, the Attorney General asserts that Adams remains controlling in felony child support convictions. The AG's argument is that the Michigan Constitution is not offended when a "prior judicial determination" establishes a payment obligation for which it is a crime to ignore.  Since Likine's support obligation was established by the family court, she was afforded Due Process.

In a somewhat surprising move given the high-powered counsel on both sides, the Court of Appeals has submitted the case to a 3-judge panel for decision without the benefit of oral argument.  The order to dispose of the case solely on the briefs was issued last week, despite both sides filing timely briefs which requested oral argument.

The losing side on this one will probably try to take the issue before the Michigan Supreme Court.

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