The Tort Tax Lives On

By: Lucy Nashed, TLR Communications Director

$3,535.

What would you buy with $3,535?

You could pay for a couple of months’ rent in a nice apartment in Austin, Dallas or Houston. $3,535 gets you more than halfway through a semester of tuition at The University of Texas at Austin. It could also buy you more than 1,100 gallons of milk, more than 1,300 gallons of gas and nearly 600 gallons of Blue Bell ice cream.

But you’re already spending that $3,535 every year, likely without even realizing it. That’s because $3,535 is what litigation cost each and every household in the Lone Star State in 2016—slightly more than the national average of $3,329—according to a new study on the cost of the U.S. tort system conducted by the U.S. Chamber of Commerce’s Institute for Legal Reform.

Nationwide, the costs and compensation of the tort system reached $429 billion, or 2.3 percent of U.S. GDP, according to the study. That accounts not only for judgments, settlements and the legal costs of lawsuits or enforcement actions, but for the cost of insuring businesses against the risk of a lawsuit.

Rather than risk being bankrupted by legal fees and lawsuit judgements, many of the businesses that provide the goods and services we use every day buy insurance to cover their costs in the event they are sued. And who ultimately ends up paying for the cost of that insurance?

That’s right, you and I do, in the form of higher prices for everything from gasoline to clothing—and yes, even Blue Bell.

That’s the Tort Tax, paid for by every single Texas family.

But Texas is a national leader in tort reform. The last 25 years have seen an about face in our legal system, away from the Wild West of Litigation and toward more fair and honest courts. Surely those costs should be lower for us Texans?

The critical reforms we have passed in Texas have certainly helped. Our Tort Tax would be significantly higher if the lawsuit abuse of 30 years ago had been left unchecked.

Unfortunately, no amount of reform can get rid of the Tort Tax completely, but we can work to make our legal system fairer and more efficient so that it will deter needless lawsuits and make legitimate litigation less costly and time consuming.

TLR is working to develop proposals for the next legislative session to help streamline the legal process and make it less expensive for those needing to resolve disputes. This would not only make the legal system more accessible for all, but it would let Texas families keep more of their hard-earned dollars to spend as they please. Even if it’s on a couple of extra gallons of Blue Bell.