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Asbestos and the federal fisc



As has been noted on more than one occasion, there are some not-implausible arguments to be made for the federal government's shouldering the cost for a goodly chunk of the asbestos litigation mess, simply because exposure to asbestos during the building and use of World War II Victory Ships accounts for such a big share of later asbestos illness. As is equally well known, the general sense in Washington is one of unwillingness to shoulder any such responsibility, leaving the financial burden instead to fall on private companies whose degree of guilt on the matter varies considerably, to say the least.

Do not imagine, however, that the feds have managed to dodge the financial fallout entirely. A news item from the Lancaster, Pa. New Era (courtesy Chamber's ILR) discusses one of the consequences of the bankruptcy of locally based Armstrong World Industries, a long-celebrated name in flooring and other building supplies, which was forced into Chapter 11 in 2000 by asbestos suits. By creating a trust valued at $1.8 billion, the firm handed over a majority stake in itself to asbestos claimants and their legal representatives. "The expense of funding the trust pushed Armstrong into tax net operating losses, which it could carry back over 10 years, triggering $180 million in tax refunds from those years." In addition, it expects further federal tax write-offs to come. Multiply those sorts of sums by dozens of large firms on the bankruptcy lists, and it turns out after all that the federal government is probably worse off by at least many billions from the litigation, in the form of forgone and refunded tax revenues. All of which would be one thing, of course, if the costs consisted mostly of payments to claimants seriously ill from asbestos exposure, and is quite a different thing given the central role in the litigation of 1) middlemen of various sorts, and 2) claimants with little or no impairment reasonably attributable to asbestos.

 

 


Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.