Berkshire Hathaway CEO Warren Buffett has long lamented the fact that he pays a lower tax rate than his secretary. Now, top executives at Berkshire Hathaway-owned BNSF railroad will pay an even lower rate than their counterparts elsewhere.

That is the outcome of the Supreme Court’s 5-4 ruling in Wisconsin Central Ltd. v. United States, which holds that railroad employees are exempt from federal employment taxes on stock-based compensation. The decision delivers a victory for Wisconsin Central and its parent company, Canadian National Railway, which stand to reap a $13 million refund as a result of the ruling, as well as for other large railroads such as BNSF. It’s a setback for the Internal Revenue Service, opening up a new loophole for taxpayers to exploit. And perhaps most significantly, it’s another triumph for a textualist mode of statutory interpretation that prioritizes dictionary definitions over practical consequences.

The statute at issue, the Railroad Retirement Tax Act of 1937, may be unfamiliar to most readers, but several elements of it closely parallel the federal employment tax regime for non-railroad employers and employees. The RRTA levies a 6.2 percent employer- and employee-side “Tier 1” tax up to a wage cap of $128,400, which matches the 6.2 percent employer- and employee-side tax on non-railroad payrolls under the Federal Insurance Contributions Act. The RRTA further imposes a 1.45 percent employer- and employee-side Medicare tax that matches the Medicare tax on non-railroad employers and their workers. And the RRTA adds an 0.9 percent tax on individuals earning over $200,000 and married taxpayers earning more than $250,000, which mirrors the additional 0.9 percent tax on other high-income employees under the Affordable Care Act. (A separate “Tier 2” tax with a much lower wage cap finances additional retirement benefits for railroad employees.)

Read more at SCOTUSBlog