The economic fallout from excessive litigation in California imposes a “tort tax” of $2,567 per person and suppresses economic activity in the state to the tune of more than 850,000 lost jobs, according to new data from Citizens Against Lawsuit Abuse (CALA).
California CALA reported last week that civil litigation excesses in the Los Angeles-Long Beach-Anaheim region have an even greater impact by imposing a $3,972 per-person “tort tax.” In turn, excessive civil lawsuits lead to a diversion of economic resources in the Los Angeles area that’s responsible for $50.8 billion in lost annual economic output, $32.2 billion in lower personal income and 427,377 lost jobs, California CALA reports.
“The ‘tort tax’ … leads to 850,915 jobs lost throughout the state, which is especially alarming given that California already has the highest unemployment rate in the nation,” Victor Gomez, California CALA’s executive director, said in a statement. “The cost of excessive litigation in California continues to rise, placing a growing burden on California families, workers and the broader economy.”
The CALA report, which was prepared by the Texas-based Perryman Group, indicates that a healthy civil justice system plays a key role in resolving disputes and curbing irresponsible actions, but when imbalanced the system can be an economic drain.
“When that happens, excessive tort costs, unpredictable outcomes and massive awards begin to distort economic decision-making and divert resources away from productive uses,” California CALA reported.
California’s “tort tax” is the fifth highest nationwide, after the District of Columbia ($7,826 per person), Washington, New York and Massachusetts, the Perryman report says. And the average “tort tax” nationwide comes in at $1,771 per person, according to the report.
States that enact tort reforms to curb litigation excesses have seen better judicial efficiency as well as improved economic performances, according to California CALA.
“A fair and balanced legal system should promote accountability, impartial justice and economic prosperity, not enrich the trial bar at the expense of working Americans,” the group reported.
In California, the Perryman study indicates that the top industries impacted by job losses due to excessive tort costs are retail trade, business services, manufacturing and health services.
The “tort tax” is substantially less in the Inland Empire region of the state. The Perryman data shows that in the Riverside-San Bernardino-Ontario region, the tax amounts to $416 per person, with lost jobs due to excessive litigation pegged at 16,414 annually, $2 billion in lost economic output and $1.2 billion in lower personal incomes, according to the report.
The California metro region bearing the highest “tort tax” is the Bay Area. The CALA data shows that in the San Francisco-Oakland-Berkley area, the tax stood at $4,297 per person, with job losses from excessive civil litigation numbering 189,192 per year and lost economic output estimated at $22.5 billion.
Statewide, excessive litigation also has a significant impact on government revenues, according to the report. Lawsuit abuse results in a loss of $5.3 billion in annual state revenues and $4.4 billion in annual local government revenues, the Perryman report says.
