August 11, 2002


Tax Bill Exceeds Award to Officer in Sex Bias Suit (ADAM LIPTAK, August 11, 2002, NY Times)
A police officer in Chicago who won a sex discrimination and harassment lawsuit against her employer may face a tax bill larger than her award.

Under federal tax laws, she is responsible for paying taxes on a $300,000 award and almost $1 million in lawyers' fees and costs.

"She loses every penny of the award," said her lawyer, Monica McFadden, "plus she will end up owing the Internal Revenue Service $99,000." [...]

Ms. McFadden said that the tax laws will result in fewer civil rights cases.

"It has an enormously chilling effect," she said. "I have to advise a person coming to me that it is entirely possible not only that any award they achieve will go to the Internal Revenue Service but that they will owe the Internal Revenue Service money."

The chilling effect is an excellent thing, with the tort system having run amok, but surely it's time for Congress to address the problem in a more rational manner. If only the Democrat Party wasn't a wholly-owned subsidiary of the Trial Lawyers' Association... Posted by Orrin Judd at August 11, 2002 7:17 AM
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