Rep. Suzan Delbene wants to make sexual misconduct settlements non-tax deductible

[Yo_Mama_Been_Loggin]

It seems like every week we’re hearing about more allegations of sexual misconduct against men in powerful positions, either in recent years or from decades ago.

Now, one of our Washington state Congress members is taking action to help stop the cover-ups.

From, the $100,000 settlement Harvey Weinstein paid Rose McGowan to settle a 1997 hotel room encounter, to the more than $27,000 paid to a former staffer of Congressman John Conyers to settle a wrongful termination issue after she allegedly refused his advances.

It turns out those settlements have been tax deductible since the 1960s, and Congressmember Suzan Delbene says that’s unacceptable.

“It’s really shameful that our tax code allows corporations to deduct settlement payments. And I think it propagates the rampant problem we see of sexual misconduct,” she said.

Delbene introduced a bill to end those tax breaks. The legislation, called Stop Tax Breaks for Sexual Misconduct Act, would eliminate the ability for corporations to deduct damages or settlements paid to victims of sexual misconduct. It would also eliminate the ability to deduct attorneys fees incurred from defending sexual misconduct cases.

Delbene says allowing tax breaks for payouts is making it all too easy for corporations to keep victims quiet.

http://mynorthwest.com/835024/suzan-delbene-sexual-misconduct/

[maxsolomon]

1. she can introduce a bill declaring the moon is made of cheese

dead on arrival.

[Orrex]

2. Now that you mention it...

How is the recipient taxed for the settlement? IMO all relevant taxes should be the responsibility of the payor, but I would imagine that it isn't set up that way.

[ProudLib72]

6. Good point!

Hadn't thought of that one. Evidently, the government can screw you twice.

[Ms. Toad]

3. Not realistic unless all settlements are non-deductible,

because as soon as sexual harassment settlements are non-deductible, the settlements will be classed as for something else.

(And making all settlements non-deductible would create a whole host of problems - since many companies settle claims they could win because the cost of settling is cheaper than the cost of fighting it. This would shift a lot more fights to the courts -ultimately making it much more costly for victims to pursue claims.

[Cicada]

4. Wouldnt this make settlements lower?

[Jim Lane]

5. Absolutely it would.

This is grandstanding. It's a way to pose as a noble opponent of sexual misconduct, while actually working against the interests of the victims.

Fewer cases would settle, thus forcing more accusers to go through the trauma of a trial -- with the attendant risk of a jury verdict for the defendant, leaving the accuser with nothing. The cases that did settle would, as you say, be for lower amounts on average.

I wonder how the bill would deal with insurance payments. Many companies buy liability insurance, so that ultimate responsibility for damage caused by an employee's misconduct rests with the insurer. Is the insurer, which didn't do anything wrong, supposed to declare as income the payments it receives as premiums, but then be prohibited from deducting (as a normal business expense) part of what it pays out in claims? An insurer that had a bad year and lost money could still owe income tax on a totally fictitious profit.