Keeping Tabs on the Tort Tax

As we head into the holidays—and particularly in today’s economy—every dollar counts.

Thankfully, gas prices have eased from their recent highs earlier this summer, but Texas families are still feeling the squeeze of inflation in everything from groceries to Christmas gifts.

But there’s one hidden cost that factors significantly into the price of goods and services that many Texans may not be aware of: the Tort Tax.

Our friends at the Institute for Legal Reform recently released a nationwide study analyzing the cost of America’s tort system—that is, how much litigation costs Americans through court costs, increased insurance premiums and lawsuit awards.

They found that in 2020 (the latest year for which data is available) the American tort system cost $443 billion—or 2.1 percent of national gross domestic product—and $3,621 per household. This is astounding when you consider that only 53 cents of every dollar go to plaintiffs, while the rest covers litigation costs and other expenses.

Unfortunately, the old saying that everything is bigger in Texas holds true here as well, with Texas families paying an extra $3,904 in costs associated with litigation—more than the national average. That’s up from $3,535 in 2018. This Tort Tax is often passed along to consumers in the form of higher prices for the goods we all want and need.

To put that in context, here are just a few things Texans could buy with an extra $3,904:

• 976 breakfast tacos from Juan in a Million
• 501 #1 Combos from Whataburger
• 1,384 gallons of gas
• Three months’ rent for an 881 square foot apartment in Houston
• Two courtside seats to watch the Dallas Mavericks play the Los Angeles Lakers on Christmas Day
• 542 half-gallons of Blue Bell Ice Cream
• 423 six-packs of Shiner Bock

Texas has come a long way from the days of jackpot justice that gave us the reputation for being the Lawsuit Capital of the World in the 1980s. But it’s clear from this study that litigation costs still loom large and still have a significant impact on the lives—and pocketbooks—of every Texan.