Because of the interest generated by law student Jeremy Babener’s research concerning lump sum dissipation, S2KM has invited Babener to continue to participate in the resulting online dialogue.
Jeremy Babener:
First, thank you to structured settlement industry leaders and commentators for integrating my research into the continuing dialogue about structured settlements. Commentators include: Patrick Hindert, Matt Bracy, and John Darer.
In discussing my paper, all three commentators have used my research to expand old and new arguments about structured settlements. This industry discussion is one of the goals of my research.
The primary purpose of this blog post is to respond directly to one of Mr. Darer’s recent postings, which appears to misunderstand and mischaracterize the thrust of the paper itself. Mr. Darer writes that my paper “attack[s] a statistic that [Babener] opines is the flawed basis for the structured settlement tax subsidy.”
The paper does attack the statistic that 90% of lump sum recipients prematurely dissipate their settlement in five years. My article, however, does not argue that the statistic is the basis for the structured settlement tax subsidy, nor does it argue that the subsidy is necessarily flawed.
Congress legislated the 1982 tax subsidy based on testimony asserting that premature dissipation of lump sum settlements was very common. As my paper notes, today’s industry practitioners attest to the same assertion. Thus, the paper’s introduction states: “The absence of such documented empirical evidence to support favorable tax treatment of structured settlements does not negate the validity of the consensus of professional opinion. From a policy standpoint, however, the fundamental importance of this subsidy demands more than mere opinion. A policy that impacts millions of taxpayers and subsidy recipients is deserving of a substantiated empirical foundation.”
Mr. Darer’s post makes an interesting point in providing statistics related to the “spendthrift proclivities of Americans.” There is much evidence to suggest that Americans are not saving at sufficient levels. For this reason, the paper observes Americans’ history of consuming through debt, quoting those who have written, “buying dreams on credit is an American invention.”
However, these statistics relate to Americans generally, not the subset of those American recipients of lump sum settlements. For example, my paper discusses how analogizing to lottery winners may not be helpful in drawing conclusions about personal injury lump sum settlements.
My paper addresses every statistic it could find directly related to personal injury lump sum dissipation. While it analyzes data indirectly pertaining to the issue, such discussion must be limited. Mr. Darer's cited data fits within and informs the larger dialogue about Americans generally.
Thanks again to industry leaders and commentators who have integrated my work into their continuing structured settlements dialogue. Special thanks to Patrick Hindert and S2KM for making this forum available.
Jeremy Babener
NYU Law ‘10
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