Law professors Gregg Polsky and Dan Markel, in an op-ed for The New York Times, write that it is time for juries to become aware that punitive damages leveled at corporations like BP are tax-deductible.
BP might soon be added to the list of payers of punitive damages for its role in the Gulf oil spill. Perhaps with that in mind, the Senate recently approved a measure to repeal deductibility for punitive damages.
The measure is well intentioned. But because most cases are settled before they reach a jury, it won't work. Fortunately, there's a better approach.
It may not entirely curb the ability of large corporations to limit the impact of punitive damages, but the professors say that tax-aware "juries would probably award higher punitive damages to offset the fact that punitive damages were tax-deductible. But more important, the prospect of tax-aware jurors would also raise the amounts before trial - when, again, most cases are actually resolved. This is because the amount of a settlement depends on the amount that a jury is expected to award after a trial. If tax-aware juries became the norm, plaintiffs would push for higher settlements, and thus both settling and non-settling defendants would bear the correct amount of punishment."
See their entire op-ed here.