The Pinpoint Policy Institute (PPI), a think tank focused on promoting free-market policies and reducing regulatory burdens, is urging the incoming Trump administration to prioritize reforms to the U.S. legal system, which they argue imposes a hidden “tort tax” on businesses and consumers, stifling economic growth.
In a Dec. 3 press release, the institute called for sweeping changes to the federal tort system to reduce the rising costs of litigation, which they describe as an “opaque tax” on the U.S. economy.
The institute’s appeal for legal reform comes as lawmakers face crucial negotiations over the extension of the 2017 tax law, which is set to expire in 2025.
“Many policy observers are aware that Congress will exercise that authority as it grapples with how to extend the 2017 tax law that will substantially expire in one year,” PPI said in the release. “Related, as the power of the executive branch has grown, so too has the capacity of the regulatory state to impose taxes through regulation—$1.8 trillion under the Biden administration—on the economy.”
The institute added that the incoming Trump administration, along with the new Congressional majority, has the opportunity to curb the regulatory state’s taxing power and reduce the impact of excessive litigation.
“The incoming administration should likewise look to reduce the pernicious effect of excessive litigation and torts that impose a very real, if opaque, form of taxation on the U.S. economy,” the release said.
PPI pointed to a recent ruling in a Delaware Court of Chancery case involving Tesla CEO Elon Musk’s compensation package as an example of excessive litigation costs.
In that case, attorneys challenging Musk’s compensation were awarded $345 million in legal fees, despite initially seeking nearly $7.7 billion—more than three times Musk’s original compensation package.
"A recent court ruling relating to Tesla Elon Musk’s pay package as Tesla Motors CEO is emblematic of this taxation by tort,” PPI said. “Unlike income taxes, the revenue provides neither for the common defense nor the general welfare, but rather the enrichment of the trial bar.”
PPI has criticized the inflated attorney fees in high-profile cases as a symptom of a broader problem. In Musk’s case, the initial $7.7 billion request was greater than the market cap of Volvo Cars.
“Legal fees like these should be deeply troubling to any reasonable policymaker who wants American economic preeminence to persist in the face of increasingly direct competition with China,” the report said. "A legal system that credulously allows attorneys to claim $17,690 per hour is clearly out of balance.”
According to the U.S. Chamber of Commerce's 2024 Institute for Legal Reform (ILR) study, tort costs in the U.S. reached $529 billion in 2022, or 2.1% of the nation’s GDP.
This figure surpasses the cost of corporate taxes, which amounted to 1.8% of GDP in 2024. The study also noted that tort costs have grown at an annual rate of 7.1% from 2016 to 2022, outpacing inflation.
“Incentives matter,” PPI said. “As torts become more lucrative, so too does the cost of insuring against them. While opaque, liability insurance against runaway torts is every bit a tax on U.S. innovators as the corporate tax rate or costly regulations.”
The institute emphasized that the burden of these costs ultimately falls on consumers.
“As these costs grow, they become embedded in prices consumers pay," the release said. "Even if you don’t own a car, exploding auto insurance premiums get embedded in the cost of transportation, much like the cost of medical liability insurance raises the cost of health care for patients. The cost of doing business in the face of the threat of litigation ultimately comes out of consumers’ pockets. As the ILR study found, on average U.S. households paid a $4,207 tort tax in 2022.”
PPI also quoted Florida’s Chief Financial Officer, Jimmy Patronis, a vocal critic of excessive litigation costs, who is running in a special election for Florida's 1st Congressional District.
"The awarding of exorbitant legal fees is like throwing sand in America’s economic engine," Patronis said. "Florida has made significant strides in reigning in these costs, and we are starting to see positive results. It’s time for the federal government to follow suit."
In 2023, Florida passed sweeping tort reforms aimed at protecting defendants, business owners, insurers, and others from excessive legal liability. The reforms reduced the statute of limitations for negligence claims, restricted attorney fee multipliers, and limited medical expense claims to actual amounts paid.
PPI is now calling on the Trump administration to prioritize tort reform as part of its broader agenda to reduce the hidden tax of excessive regulation and litigation. They argue that addressing rising litigation costs will reduce economic burdens on businesses and consumers, foster innovation, and help the U.S. remain globally competitive.
“As the Delaware judgment makes clear, more could be done at the federal level to curb the egregious growth in tort costs,” the institute said. “There is every reason to believe that the incoming administration will address the threat of major income tax increases and begin to claw back some of the growth in the administrative state. They should also embrace the opportunity to cut tort taxes that are every bit as burdensome as income taxes and heavy-handed regulations.”
The Pinpoint Policy Institute, launched in August 2024, is led by Executive Director Gordon Gray. The think tank promotes free-market and pro-growth policies, while actively opposing regulations that hinder entrepreneurship.
