We're not scaling back but did a purge a couple of years ago of nonprofitable and PITA clients.

We used this:

"Over the years as our firm has grown, our operational costs have increased and accordingly, our bill rates and our fees are increasing.  As part of our annual business plan review, we have conducted an analysis in an effort to focus the future direction of our accounting practice. We have reviewed our clients’ needs to determine how each client fits in with our plans. 

After careful consideration, we don’t feel we can continue to service your needs at an affordable price.  Therefore, we have decided that we will be unable to provide tax preparation services to you as your accountants. This will be effective January 1, 20XX"

I wasn't entirely happy with the wording or the process but it worked. YMMV.

P.S. Your professional liability insurance carrier may have sample disengagement letters, too. I think we used them as well as some from AICPA as templates. The good clients we referred to another firm. The PITAs we did not.