Five-year survey reveals economic health, stability for U.S. law firms

During the past five years, average gross revenue per lawyer has increased 13.7 percent, according to the 1996 Altman Weil Pensa Survey of Law Firm Economics. Overhead expenses also have increased, but at a slightly lower rate (10.2 percent) than revenues, yielding an overall increase in firm income per lawyer of 16.7 percent.

The 1996 survey includes data about 26,443 individuals from 383 U.S. law firms.

Firm size continues to be a key variable in net income per lawyer, with large firms averaging $153,000 in net income per lawyer, compared with $125,000 in net income per lawyer for smaller firms.

However, firm income may be flattening out. After a 7.5 percent increase in 1994, the average increase in 1995 was just 2.1 percent, less than the rate of inflation. 1995's average firm income represented 55.3 percent of gross revenues, down from 55.8 percent in 1994.

For the fifth year in a row, firms are reducing debt. Debt per lawyer decreased 6.3 percent from 1994 to an average of $15,360 per lawyer in 1995. Since 1991, debt per lawyer has dropped by a significant 22.2 percent.

At the same time, inventories have increased, leading to higher projected revenues in 1996, presuming the inventories are collectable. Accounts receivable increased 6.6 percent from 1994, to an average of $45,097. Since 1991, accounts receivable have increased by 11.2 percent. Work-in-progress per lawyer increased 5.9 percent from 1994. Since 1991, work-in-progress per lawyer has increased 53.4 percent.

The higher inventories, in conjunction with lower debt, contribute to more stable financial situations at many firms.

Wisconsin study says IRS tax code favors whites over blacks

A study published in the Wisconsin Law Review concludes that blacks pay higher taxes than similarly situated whites, primarily because the history of American racism has left blacks with less wealth, political clout and different lifestyles than their white counterparts.

U.W. Law Professors Beverly Moran and Bill Whitford, the authors of "A Black Critique of the IRS Code," base their conclusions on studies drawn from U.S. census data and other large databases. Using the data to match black and white families by age, education, income, location and marital status, they show that race remains a signficant factor in a family's tax liability.

By looking at four major provisions in the Internal Revenue Code (individual investments, home investments, employee benefits, and marriage penalties and bonuses), Moran and Whitford found that blacks are less likely to receive Internal Revenue Code benefits for owner-occupied housing, other forms of investments and employee benefits than similarly situated whites, and are more likely to pay the so-called "marriage penalty."

The study suggests that since blacks are more likely to rent than own, they get fewer tax-related housing benefits such as the home-mortgage interest deduction. They also receive lower base salaries that translate into lower pensions and other tax-deferred income. This then results in higher taxes on their overall wages.

Moreover, because even high-income blacks own considerably less wealth than their white counterparts, they are much less likely to get the benefits accorded to stocks, bonds and mutual funds, say the authors. In a lifestyle contrast, since black wives are more likely to work, black couples more often face the "marriage penalty." The authors conclude that differential appointments of the tax code are an issue that should be considered in future tax legislation.

Wisconsin Lawyer