On 29 July, the California Legislature passed Governor Arnold Schwarzenegger’s $105bn (£57.7bn) budget, which included a controversial provision allowing the state to impose a 75% tax on punitive damages awarded in civil actions in state courts. The provision that the legislature actually passed, however, is a far cry from the aggressive proposal originally put forward by the Governor.
The language of the statute enacting the controversial tax is itself quite telling. The legislature almost apologises for taking this “uniquely extraordinary legislative action” to address “extraordinary and dire budgetary needs”. It is also keen to reassure us that the statute is not only of limited duration, but is also intended to have no long-term policy implications. Indeed, under these circumstances, we have to wonder why the statute was enacted at all.
