Uncle Sam’s cut of the settlement

Uncle Sam’s cut of the settlement

The Boston Globe reports that people getting big settlements from Church may get big tax bills. They give as an example: Someone getting $200,000 will have to pay $70,000 to his lawyer (why no protest over that amount?) and another $35,000 to the federal government (why no protest over the government’s confiscatory tax rates at the highest brackets?).

There is some gray area because in 1995 the law was changed so that lawsuit damages are not taxable if they are for physical injury and taxable if they are for emotional injury. There is some gray area in the law because there is no black and white line for defining one from the other. Is a settlement for being abused by a priest for emotional or physical injury? What if the victim suffers from ulcers caused by post-traumatic stress? You could argue either way.

The reasoning behind the law was an attempt at back-end tort reform. For years, we have seen increasingly large jury awards in employment-related lawsuits, but actual damages and “emotional” damages were astronomically far apart. Actual damages had to be based on real damage, but emotional damages were punitive. Someone with a broken leg gets $5,000 and someone with a broken self-esteem gets $5 million. And so Congress said, uh uh, you don’t get all that unearned money tax free. Remove the some of the incentive and you people may slow down the runaway tort train.

But I kept waiting for the other shoe to drop in the article. Who was the object of the reporter’s ire? Certainly not the trial lawyers. Certainly not the Democrats who pass high tax rates. i was surprised it wasn’t the Church this time. But all was revealed in the last paragraph.

“What about people who break into sweats, or whose hearts start to race, or suffer from insomnia or vivid nightmares?” asked lawyer Carmen L. Durso, who represents 42 people with claims against the archdiocese. “Are those physical? It’s crazy. It was a misguided effort by Republicans in Congress to punish people who were being successful in court.”

Ah yes, the evil Republicans.

Written by
Domenico Bettinelli

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