Tort Reform=Strong State Economies, Healthy State Budgets
June 11, 2008
Can tort reform help states generate better economic growth and healthier budgets? Yes, according to Dr. Lawrence McQuillan, a scholar at the Pacific Research Institute (PRI).
In an oped published in the Mobile, Alabama Press-Register, McQuillan found that states with a fair, predictable tort system had stronger revenue outlooks, better job growth and more favorable prospects for economic growth. Using a new report by the National Conference of State Legislatures which analyzed budgets in all 50 states, McQuillian found:
* States classified as having “optimistic” revenue outlooks for 2009 had an average tort-system ranking of 4 (1 is the best ranking, 50 the worst); PRI U.S. Tort Liability Index: 2008 Report. States with a “pessimistic” revenue outlook had a average tort-system ranking of 36th.
* In 2006, job growth was 57 percent greater in the 10 states with the best tort systems than in the 10 states with the worst. The same year, state-level GDP grew 25 percent faster in the 10 best vs. the 10 worst.
* In 2006, the top 10 tort states had an average growth rate of tax revenues that was 24 percent greater than the bottom 10. The greater infusion of tax revenue, it should be noted, was due to higher economic growth, not higher tax rates.
“A costly and risky tort system produces a grim revenue picture,” McQuillan concludes. “The lesson is clear: States with a better tort system enjoy a greater inflow of tax revenue because they have a stronger economy. States with a poor tort system suffer from weaker economies and sluggish tax revenues.”