TORT REFORM MEETS BUDGET REFORM….Governor Arnold has proposed a 75% tax on punitive damages in civil lawsuits in California. This probably isn’t a bad idea, and it’s been tried successfully in other states, but Arnold’s proposal has a twist: he’s touting it as a way to help us out of our budget mess. He thinks it might raise $450 million a year.
Now, a lot of this depends on details: does it apply to all suits, or only some? All damages or only “excessive” damages? Before the lawyers get their cut or after? Etc.
However, Dwight Meredith, an attorney in Georgia, reports that Georgia has had a similar law on its books for several years and has raised slightly less than you might expect. They’ve raised exactly nothing. And although Georgia’s law is different and more restricted than Arnold’s proposal, Dwight still has some pretty compelling arguments that the amount of money raised would be pretty paltry. Taxing punitive damages might be a good idea on other grounds, but as far as the deficit goes it’s just smoke and mirrors.
POSTSCRIPT: And speaking of the Governator, the LA Times has an entertaining story today suggesting that the honeymoon is over. Arnold has kept his popularity high by being deliberately vague on a lot of contentious issues, but legislation season is upon us and pretty soon he’s going to be forced to show his hand and either sign or veto a lot of very specific bills. Is he in favor of raising the minimum wage? Importing drugs from Canada? Forbidding candidates from, ahem, loaning themselves more than $100,000 in a statewide campaign? Banning sales of cruelly produced foie gras?
Decisions, decisions. On the other hand, Arnold has proven himself a very adroit politician, and it’s possible that a few carefully selected vetoes could actually help his cause. He’s a clever guy.