The governor of California has proposed to tax 75 percent on all punitive damage awards. New York State and the federal government do not tax punitive damages.
Punitive damages are awarded to punish defendants and to set an example. Often reduced on appeal, these damages often make headlines because of the record sums that are awarded. Although I did not read the decision, I am sure that a $195 million dollar judgment that was recently awarded against the City of New York to a child that was bullied(see April 28th posting) was comprised mostly of punitive damages.
Read this article for reaction regarding the proposal. Do you think punitive damages should belong to the state or to the individual?