NCPA - National Center for Policy Analysis

Trial Lawyers and States Prefer Judicial Taxation

August 17, 2000

Increasingly, tax policy is being made through the courts rather than through legislatures, say analysts critical of the trend. Government regulators have joined with trial lawyers to raise government revenues through litigation by targeting lawful industries they have attempted to link to human injury or illness. This strategy conflicts with constitutional principles that reserve the power to tax solely to the elected representative in legislatures.

  • While judicial taxation began in the school desegregation cases of the '60s and '70s, it reached new heights in a Kansas City, Mo., case when a federal judge ordered the city's property taxes doubled to fund his novel desegregation plan.
  • In more recent cases, trial lawyers and the state attorneys general have taken a subtler approach to judicial taxation by joining in attacks on specific industries.

The settlement by the tobacco industries has given these players added confidence to expand their attacks to gun and paint manufacturers. It is likely only a matter of time before they attack others -- such as dairy product producers, automobile manufacturers and fatty foods makers.

Critics contend litigation is essentially taxation by parties not responsible to the voters. Ultimately consumers will bear the costs of this litigation in higher prices for these targeted goods.

Last year, for instance, in the face of litigation by private lawyers with the support of federal agencies and city governments, Colt Manufacturing closed part of its operations and laid off 35 percent of its workforce.

Source: Douglas Lathrop, "The Origins and Future of Judicial Taxation," State Factor, November 1999, American Legislative Exchange Council, 910 17th Street N.W., Fifth Floor, Washington D.C., 20006.


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