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Joe Biden's bloated spending bill contains a special gift for trial lawyers

Washington Examiner logo Washington Examiner 11/28/2021 Washington Examiner
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Sometimes lawsuits are necessary to uphold the rights of a plaintiff. Sometimes, they are needed to redress serious wrongs. But as an economic activity, "more lawsuits" is just about the last thing the tax code should be encouraging or incentivizing.

As usual, someone forgot to wake President Joe Biden and tell him.

Trial lawyers, who have long invested in Biden and other Democrats, bought themselves a provision in the massive spending bill that Democrats moved through the House last week. Tucked deep within its pages is a huge tax break that slip-and-fall trial lawyers and their allies have been trying to force into law for more than a decade. It would allow them to write off the costs of contingency litigation — for example, expert witnesses — upfront. Currently, as with other business ventures, trial lawyers recoup their expenses by winning judgments and settlements that cover them, or else they write off the losses when they lose the case.

According to the Joint Committee on Taxation, this special-interest tax break will let contingency lawyers off the hook for $2.5 billion in tax revenue over 10 years. That may not sound like a lot, but consider where the money is going. It will be used to fund a dagger pointed straight at the heart of the nation's economy.

Specifically, taxpayers will be underwriting what are currently considered marginally dubious lawsuits against businesses.

This is because the upfront tax deductibility of such litigation changes the calculus that determines whether a plaintiff's lawyers decide to take a given case. They don't want to file obviously losing suits because they have to invest their own money into cases they may never get paid for. And they are always eager to bring cases that are clearly backed by the facts and the law. This won't change any of that. But if plaintiffs' lawyers are being given an effective subsidy upfront in the form of tax deductibility, it makes it that much easier to take cases that are on the edge — less meritorious than the ones they take now.

When dubious lawsuits are filed, that doesn't mean the attorneys won't make bank or that the business being sued won't suffer. Often, small businesses are forced to settle very dubious lawsuits because an actual trial can be ruinously expensive. Faced with the possibility of paying lawyers fees for depositions, days in court, and discovery, among other things, many small business owners would simply rather settle. And currently, only the most egregious cases ever end up with plaintiffs paying for the defense attorney's fees. Many businesses are just a lawsuit away from going under, especially in these trying times.

As terrible as Biden's bloated spending bill would be for inflation and the economy in general, the presence of this provision alone would be sufficient grounds for voting it down.

Like the Obama administration before it, Biden's administration is doling out favors to special interests that donate outrageous amounts to Democrats.

This is not something that a closely divided country needs. It is not something that the fragile economy needs at a moment when it is on a shaky path to recovery.

 

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Original Location: Joe Biden's bloated spending bill contains a special gift for trial lawyers

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