“TORT TAX” – A MADE UP PERIL
Claims that a so-called “tort tax” harms the American economy have proliferated on the Internet and in ideologically motivated journalism in recent years. While the numbers claimed in these reports and websites are easy to advance, they have little basis. "Tort tax" studies, suffer from poor methodology, exaggerated addition, a studied indifference to the system's benefits, and most importantly, a fundamental misunderstanding of the insurance costs that they equate with tort costs.
Peter Huber's $300 Billion Figure
The "scholarship" of Peter Huber, a leading tort tax proponent who claimed the tort system cost
Judge Roger Miner of the U.S. Court of Appeals for the Second Circuit, a conservative Reagan appointee, said that the "$300 billion figure has been demonstrated to be a product of casual speculation and not derived in any sense from investigative or statistical analysis." Similarly, The Economist has scored the figure as having "no discernable connection to reality" and for being "impossible to justify."
Beacon Hill Institute Study
This study, the source for the figure of a
National Bureau for Economic Research (NBER) Report
The NBER report, which purports to show that tort "reforms" have a positive impact on a state's economy, has never appeared in a peer-reviewed journal. Even so, the report found that "tort reform" produced no increases in productivity or employment in either manufacturing or health care, the two areas that "tort reformers" claim are the most hurt by the liability system. The NBER researchers could not rule other possible alternative reasons for the increased output they claim to have found in states that enacted "tort reform," such as tax cuts or demographic shifts. In fact, the authors themselves recognize this flaw. Without accounting for these other effects, the authors cannot authoritatively claim that liability "reform" leads to increased economic output.
For a scholarly evaluation, see the Florida State University Law Review: