Lawsuit Abuse Is the Hidden Tax Washington Ignores

Originally published at National Review.

Washington keeps talking about inflation, tariffs, and taxes. But if policymakers are serious about lowering costs and strengthening the economy, they cannot ignore a burden quietly making life more expensive: lawsuit abuse.

The tort system matters in a free society. If someone is harmed by negligence or fraud, that person should be able to seek relief in court. A sound tort system can compensate victims and deter wrongdoing. But unfortunately, the litigation industry often looks like a business model built to extract massive settlements, enrich trial lawyers and outside financiers, and shift the costs onto everyone else.

​This is not some niche legal issue. Rather, it is an affordability issue that hurts American families, workers, entrepreneurs, and consumers. The widespread abuse of the civil justice system is a direct drag on growth, wages, investment, and opportunity.

Tort costs reached an estimated $529 billion in 2022, equal to 2.1 percent of GDP and about $4,200 per household. Those costs have been rising faster than both inflation and the broader economy, and they are projected to surpass $900 billion by 2030 if the upward trend continues.

Excessive tort costs also raise average prices across the economy by about 1.3 percent, adding roughly $320 billion in annual inflation costs to households. Total consumer losses from higher prices and lower earnings are estimated at about $674.4 billion per year, or roughly $5,135 per household.

Some essentials get hit even harder. For example, prescription drugs are estimated to be about 9 percent more expensive because of excess tort costs. Likewise, home insurance and health insurance are pricier.
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Call it what it is: a tort tax. Families pay it, whether they know it or not.

Main Street gets hammered, too. Businesses with $10 million or less in annual revenue account for only a modest share of commercial activity, yet they bear roughly 48 percent of commercial tort costs. That means the firms least able to absorb legal uncertainty are the ones most likely to postpone hiring, shelve expansion plans, raise prices, cut services, or even shut down entirely.

The latest jobs report by the National Federation of Independent Businesses found that only a net 12 percent of small-business owners plan to create new jobs in the next three months, the lowest reading since May 2025. Entrepreneurs are thinking twice before taking risks, while workers get fewer opportunities. In a country already worn out by affordability pressures, this is unnecessary self-inflicted damage.

One of the biggest drivers of abuse is the Multidistrict Litigation (MDL) Act of 1968. In theory, MDL was introduced to efficiently consolidate similar federal cases. In practice, it has become an assembly line for weak or poorly vetted claims. Materials submitted in the federal rules process in recent years indicate broad concerns that some large MDLs include unsupportable claims.

For example, there are currently over one dozen municipalities suing American fire-truck manufacturers for alleged anticompetitive practices. Many of them are experiencing budget problems, such as federal or state cuts. Since each plaintiff is seeking the maximum of $5 million in damages, the lawyers have a strong incentive to recruit additional parties for a larger settlement.

Yet, the lawyers in such cases typically keep much of the money from contingency fees and other payments, while adding a substantial cost to many American businesses.

The good news is that states are beginning to respond. 

In 2025, Georgia enacted S.B. 68 and S.B. 69, targeting abusive practices and increasing transparency around third-party funding for litigation. Iowa took a similar step in 2023 with H.F. 161, which limits noneconomic damages in medical malpractice cases while preserving high awards for severe injuries. Additionally, Texas has debated similar reforms, such as S.B. 30 in 2025, to discourage the rise of frivolous tort lawsuits and to reduce settlement fees that are inappropriately large.

The choice is not between justice and reform. That is the lazy framing trial lawyers prefer. The real choice is whether courts will remain places to resolve genuine harm, or continue to be vehicles for wealth transfer and economic distortion.
Tort reform will not solve every affordability problem in America. But it would remove one of the dumbest, costliest burdens we impose on ourselves. And right now, families could use every break they can get.