Previously, in contingency cases, attorneys would have to front the costs of a major case themselves, and then hope to recoup that investment with a jackpot jury award. This risk assumed by the personal injury lawyer acted to curb the number of frivolous lawsuits submitted. Allowing the lawyers to deduct these costs shifts the financial burden onto the federal government to some extent. Moral hazard is enjoined.
From the Washington Legal Foundation's Walter Schwartz:
If Senator Specter’s proposed modification of the Internal Revenue Code succeeds, the federal government will, for all intents and purposes, share in the cost and risk of bringing the initial litigation. Under current and certainly potential future tax laws, this could be as much as 40% of the cost of bringing litigation.
That's just fantastic.