27 Mar 2007

The Tort Tax

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Lawrence J. McQuillan and Hovannes Abramyan have done a study of the economic impact of American Tort litigation. Their conclusions are more than a little appalling.

Economists have long understood that America’s tort system acts as a serious drag on our nation’s economy. Although many excellent studies have been conducted, no single work has fully captured the true total costs, both static and dynamic, of excessive litigation.

The good news: We now have some reliable figures. The bad news: The costs are far higher than anyone imagined.

Based on our estimates, and applying the best available scholarly research, we believe America’s tort system imposes a total cost on the U.S. economy of $865 billion per year. This constitutes an annual “tort tax” of $9,827 on a family of four. It is equivalent to the total annual output of all six New England states, or the yearly sales of the entire U.S. restaurant industry.

Anything useful you could do with an extra $9827 a year?

Read the whole thing.

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