Penalties for breaking the law are meant to deter individuals from committing offenses and ensure that justice is served. However, in many cases, laws that impose fines as penalties have become ineffective in achieving these goals, particularly when it comes to the wealthy and big business. Here, I call out inherent inequality in a fine-based legal system, examine real-world examples, and present studies that highlight the issue, ultimately demonstrating that laws with fines as the sole penalty are not really laws at all for the well-off.

The Problem with Fines

Fines are a common form of punishment for various offenses, from parking violations to environmental regulations. They are intended to deter individuals from breaking the law by imposing a financial cost on the offender. However, this cost is often negligible for the wealthy, who can easily afford to pay the fine and continue the unlawful behavior.

A study by the Institute for Policy Studies found that the wealthiest 1% of Americans hold 42.5% of the nation’s wealth (Collins et al., 2020). In a fine-based system, this extreme concentration of wealth allows the rich to effectively sidestep the law by absorbing fines as a minor expense. Consequently, fines lose their deterrent effect and fail to hold the wealthy accountable for their actions.

Real-world Examples

• Environmental Regulations: One notable example of this phenomenon is the ongoing struggle to enforce environmental regulations. In a case involving Duke Energy, the company was fined $102 million for violating the Clean Water Act, yet it generated $23.5 billion in revenue that same year (EPA, 2015). The fine, a mere 0.4% of the company’s annual revenue, hardly served as a deterrent, and the company has continued to face allegations of environmental violations.
• Corporate Fraud: Similarly, corporate fraud often results in fines that are inconsequential to the wealthy. In 2018, Wells Fargo was fined $1 billion for consumer abuses, including creating fake bank accounts, but this represented only a small portion of the bank’s annual revenue, which exceeded $86 billion that year (CFPB, 2018). It is difficult to argue that the fine effectively punished Wells Fargo or deterred similar behavior in the future.
• White Collar Crime: The problem of fines not serving as an effective deterrent also extends to individuals involved in white-collar crimes. For instance, billionaire hedge fund manager Steven A. Cohen was fined $1.8 billion for insider trading but was able to rebuild his fortune within just a few years (Protess & Goldstein, 2013). Again, the fine proved to be an insufficient deterrent for those with vast resources.

The Studies: Evidence of Inequality

Several studies have examined the impact of fines on both wealthy and low-income individuals. These studies consistently demonstrate that fines disproportionately affect the poor while having a minimal impact on the rich.

• The Hamilton Project: A study by the Hamilton Project at the Brookings Institution found that fines and fees disproportionately affect low-income individuals, who may struggle to pay even relatively small penalties (Harris et al., 2017). This can result in a cycle of debt and incarceration, further entrenching poverty.
• Institute for Justice: A report by the Institute for Justice concluded that fines and fees often create a two-tiered system of justice, where wealthy individuals can simply pay their way out of trouble, while low-income individuals are trapped in cycles of debt and punishment (Carpenter II et al., 2020).
• ACLU: The American Civil Liberties Union has similarly examined the issue of fines and fees in the criminal justice system, finding that monetary penalties disproportionately burden the poor and perpetuate racial and economic disparities (ACLU, 2010). According to the ACLU report, these fines and fees can lead to license suspensions, job losses, and even imprisonment for those unable to pay, further exacerbating social inequality.

Addressing the Inequality

To address the inherent inequality in a fine-based legal system, several solutions have been proposed:

• Graduated Fines: One proposed solution is to implement a system of graduated fines, where penalties are determined based on the individual’s income or assets. This approach would ensure that fines are more equitable and serve as an effective deterrent for all income levels. Finland, for example, has successfully implemented a system of “day fines,” where penalties are calculated based on an offender’s daily income (BBC News, 2015). This model has been praised for its fairness and proportionality.
• Community Service and Restorative Justice: Another approach involves replacing fines with alternative forms of punishment, such as community service or restorative justice programs. This would not only avoid exacerbating wealth disparities but also foster a sense of accountability and responsibility among offenders. Research has shown that restorative justice programs can lead to higher rates of victim satisfaction and reduced recidivism (Sherman & Strang, 2007).
• Strengthening Enforcement: Finally, enforcement agencies must be given the resources and authority to hold wealthy individuals and corporations accountable for their actions. This includes ensuring that penalties are severe enough to deter unlawful behavior and that enforcement agencies have the capacity to investigate and prosecute these cases effectively.

What Can Be Done?

Laws that impose fines as the sole penalty create a system that is inherently unequal, disproportionately burdening the poor while allowing the wealthy to avoid accountability. As this editorial has demonstrated through real-world examples and studies, fines often fail to serve as an effective deterrent for those with ample resources. To address this issue, policymakers must consider implementing graduated fines, alternative forms of punishment, and strengthening enforcement efforts. By doing so, we can work towards creating a more just and equitable legal system that truly serves the interests of all citizens, regardless of their financial status.