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Legal Realism and the New Gilded Age


Today in Wisconsin Central v. U.S., a party-line 5-4 majority of the Supreme Court held that the stock options of railroad executives are not “money renumeration” that qualify as “compensation” for the purposes of the Railroad Retirement Act of 1937, and hence some lucky ducky railroad executives get a hefty tax-free pension. Since stock options can immediately be converted into cash, this is…not a very plausible interpretation. According to Neil Gorsuch, however, the theory of original meaning leaves them with no choice:

If this technique of citing dictionary definition reminds you of bad papers written by college sophomores, you’re not wrong!

Leaving aside problems with originalism in general, there is another major problem with Gorusch’s opinion. As Breyer observes in his dissent, it overturns an Treasury Department interpretation that has been on the books since…1938:

Assuming arguendo that original meaning is the best method of interpreting the statute, who is likely to have a better line on what statutory language enacted by a Democratic Congress in 1937 — officials in FDR’s Treasury Department in 1938, or Republicans on the Supreme Court in 2018? I don’t think this is a very difficult question to answer. Indeed, I’m beginning to think that this result was not produced by the neutral application of grand theories of statutory interpretation but by the fact that one of the two key organizing principles of the contemporary Republican Party is reducing the tax burden on the upper class.

I’m also reminded of this from dsquared’s classic Iraq essay:

Good ideas do not need lots of lies told about them in order to gain public acceptance. I was first made aware of this during an accounting class. We were discussing the subject of accounting for stock options at technology companies. There was a live debate on this subject at the time. One side (mainly technology companies and their lobbyists) held that stock option grants should not be treated as an expense on public policy grounds; treating them as an expense would discourage companies from granting them, and stock options were a vital compensation tool that incentivised performance, rewarded dynamism and innovation and created vast amounts of value for America and the world. The other side (mainly people like Warren Buffet) held that stock options looked awfully like a massive blag carried out my management at the expense of shareholders, and that the proper place to record such blags was the P&L account.

Our lecturer, in summing up the debate, made the not unreasonable point that if stock options really were a fantastic tool which unleashed the creative power in every employee, everyone would want to expense as many of them as possible, the better to boast about how innovative, empowered and fantastic they were. Since the tech companies’ point of view appeared to be that if they were ever forced to account honestly for their option grants, they would quickly stop making them, this offered decent prima facie evidence that they weren’t, really, all that fantastic.

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