A lawmaker’s idea to slap a 41% tax on the litigation finance industry has caused a mini-panic among investors as Congress negotiates details of a sweeping budget bill.

Senator Thom Tillis (R-NC) last month introduced legislation he called the Tackling Predatory Litigation Funding Act, which would impose the tax on profits earned by third-party entities that finance civil litigation. The bill describes the tax as being equal to the highest individual rate, 37%, plus an additional 3.8%.

Prospects of the legislation successfully winding its way through Congress by itself are dim. But Tillis is trying to include the bill in …