When juries award huge punitive damages against oil companies in the wake of a spill, they're often unaware of a simple fact: the companies can ease their own pain by deducting the damages on their federal income taxes, write two law professors in the New York Times. The Senate has passed a measure to make such deductions illegal, "but because most cases are settled before they reach a jury, it won't work."
There's a simpler, and better, approach: "Why not have plaintiffs’ lawyers make jurors aware of the tax deductibility of punitive damages, and teach them how to adjust their awards to offset the deduction’s effect?" Jurors would probably dole out higher punitive damages in trials. "But more important, the prospect of tax-aware jurors would also raise the amounts of settlements before trial—when, again, most cases are actually resolved."