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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, July 18, 2011

Polsky & Markel: Revisiting the Taxation of Punitive Damages

Gregg Polsky (North Carolina) & Dan Markel (Florida State) have posted Revisiting the Taxation of Punitive Damages, 97 Va. L. Rev. In Brief ___ (2011), on SSRN. Here is the abstract:

In our recent article, Taxing Punitive Damages, [96 Va. L. Rev. 1295 (2010)], we argued (1) that plaintiffs in punitive damages cases should be allowed to introduce to the jury evidence regarding the deductibility of those damages by defendants, and (2) that this jury tax-awareness approach is better than the Obama Administration’s suggested alternative of disallowing those deductions.

To our delight, Professor Larry Zelenak [Of Punitive Damages, Tax Deductions, and Tax-Aware Juries: A Response to Polsky and Markel, 96 Va. L. Rev. In Brief 61 (2010)] and Paul Mogin [Don't Tilt the Playing Field: A Response to Polsky and Markel, 96 Va. L. Rev. In Brief 69 (2011)] have each provided published comments to our piece on Virginia Law Review's In Brief companion website. Professor Zelenak’s thoughtful response focuses on our prescriptive claim that jury tax-awareness is better than nondeductibility, while Mr. Mogin disputes our doctrinal claim that the tax evidence is admissible. In this draft reply, we offer our answers to these and related challenges.

Dam Markel, What Will Congress do Regarding the Tax Treatment of Punitive Damages? (PrawfsBlawg):

Gregg and I have just seen one of Congress' Joint Committee on Taxation reports for 2011, and we noticed that the Committee has acknowledged our argument, but hasn't really grappled with its implications fully. So, at this point, we are waiting to see what happens. Our hope is that the Obama Administration and folks in Congress (and the relevant lobbyists too!) read our work and realize that a repeal of the deductibility of punitive damages will interfere with both the appropriate punishment of business defendants and the states' choices to run their tort system in a way that achieves the goals they intend to set out for themselves.

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