Will Tort Reform Help Your Business: Fat Chance!


In the press, much publicity has been made about the so-called impact of personal injury litigation upon small and large business owners in New York and specifically, that businesses are leaving the State as a result of the “lawsuit friendly” environment in New York. Some claim that tort reform (eliminating or reducing the rights of personal injury victims) will improve the business environment in New York and convince business owners to sty in the Empire State. FAT CHANCE!

Richard Vedder, a professor at Ohio University, conducted a study to determine why businesses are leaving states such as New York and New Jersey and guess what he found: “tort deform” is not the reason that business owners are leaving New York in droves. The reasons everyone is fleeing New York? Real simple: the state is “soaking the rich” with taxes. Richard Vedder concludes that “soaking the rich doesn’t work”.

From 1998 to 2007 more than 1,100 people move every day from the nine highest income tax states, such as New York and New Jersey, and relocated to the nine tax-haven states with no income tax. During this timeframe, the no income tax states created 89% more jobs and had 32% faster personal income growth than the high tax states. The statistical evidence is clear: people are leaving tax-unfriendly states, like New York, and moving to tax-friendly states, like Texas and Tennessee.

Statistical evidence shows that high state an local taxes repel jobs and businesses. Today, New York’s income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation. The two highest tax states in the nation, California and New York, have the biggest fiscal holes to repair.

The question becomes: How do you stop the exodus of jobs from New York? Enact new laws, called “tort deform”, that limit the rights of consumers to sue and recover for personal injury? Not a chance! The “Texas Model” provides answers.

Texas has no state income tax, the lowest sales tax and the fewest overall taxes in terms of the number of taxes on a state and local level. Here’s what you need to know about Texas: Texas created more new jobs in 2008 than all other 49 states combined. The Texas economic model makes a whole lot more sense than the New York model.

Even worse, the tax differential between low-tax and high-tax states is widening, meaning that the continued exodus of persons from high tax states like New York to no income tax Texas or Tennessee, is more probable and likely to continue. No income tax states, like Florida, Nevada, New Hampshire and Texas, are flourishing with new business and higher personal income while high tax states, like New York, are dying painful deaths.

What does this mean for you? If you want to find a friendly business environment, flee from New York now! Personal injury lawuits are not killing your business–excessive taxation by the state is crushing your ability to thrive in New York. Keep the study by Richard Vedder, entitled “Soaking the Rich Doesn’t Work”, in mind the next time someone tells you that personal injury litigation is hurting business in New York.