United State v. Kahriger/Opinion of the Court
The issue raised by this appeal is the constitutionality of the occupational tax provisions of the Revenue Act of 1951,  which levy a tax on persons engaged in the business of accepting wagers, and require such persons to register with the Collector of Internal Revenue. The unconstitutionality of the tax is asserted on two grounds. First, it is said that Congress, under the pretense of exercising its power to tax has attempted to penalize illegal intrastate gambling through the regulatory features of the Act, 26 U.S.C. (Supp. V) § 3291, 26 U.S.C.A. § 3291, and has thus infringed the police power which is reserved to the states. Secondly, it is urged that the registration provisions of the tax violate the privilege against self-incrimination and are arbitrary and vague, contrary to the guarantees of the Fifth Amendment.

The case comes here on appeal, in accordance with 18 U.S.C. § 3731, 18 U.S.C.A. § 3731, from the United States District Court for the Eastern District of Pennsylvania, where an information was field against appellee alleging that he was in the business of accepting wagers and that he willfully failed to register for and pay the occupational tax in question. Appellee moved to dismiss on the ground that the sections upon which the information was based were unconstitutional. The District Court sustained the motion on the authority of our opinion in United States v. Constantine, 296 U.S. 287, 56 S.Ct. 223, 80 L.Ed. 233. The court reasoned that while 'the subject matter of this legislation so far as revenue purposes is concerned is within the scope of Federal authorities', the tax was unconstitutional in that the information called for by the registration provisions was 'peculiarly applicable to the applicant from the standpoint of law enforcement and vice control', and therefore the whole of the legislation was an infringement by the Federal Government on the police power reserved to the states by the Tenth Amendment. United States v. Kahriger, D.C., 105 F.Supp. 322, 323.

The result below is at odds with the position of the seven other district courts which have considered the matter,  and, in our opinion, is erroneous.

In the term following the Constantine opinion, this Court pointed out in Sonzinsky v. United States, 300 U.S. 506, at page 513, 57 S.Ct. 554, at page 555, 81 L.Ed. 772 (a case involving a tax on a 'limited class' of objectionable firearms alleged to be prohibitory in effect and 'to disclose unmistakably the legislative purpose to regulate rather than to tax'), that the subject of the tax in Constantine was 'described or treated as criminal by the taxing statute.' The tax in the Constantine case was a special additional excise tax of $1,000, placed only on persons who carried on a liquor business in violation of state law. The wagering tax with which we are here concerned applies to all persons engaged in the business of receiving wagers regardless of whether such activity violates state law.

The substance of respondent's position with respect to the Tenth Amendment is that Congress has chosen to tax a specified business which is not within its power to regulate. The precedents are many upholding taxes similar to this wagering tax as a proper exercise of the federal taxing power. In the License Tax Cases, 5 Wall. 462, 18 L.Ed. 497, the controversy arose out of indictments for selling lottery tickets and retailing liquor in various states without having first obtained and paid for a license under the Internal Revenue Act of Congress. The objecting taxpayers urged that Congress could not constitutionally tax or regulate activities carried on within a state. 5 Wall. at page 470. The Court pointed out that Congress had 'no power of regulation nor any direct control' 5 Wall., at pages 471, 472, over the business there involved. The Court said that if the licenses were to be regarded as by themselves giving authority to carry on the licensed business it might be impossible to reconcile the granting of them with the Constitution. 5 Wall at page 471.

'But it is not necessary to regard these laws as giving such      authority. So far as they relate to trade within State      limits, they give none, and can give none. They simply      express the purpose of the government not to interfere by      penal proceedings with the trade nominally licensed, if the      required taxes are paid. The power to tax is not questioned,      nor the power to impose penalties for non-payment of taxes. The      granting of a license, therefore, must be regarded as nothing      more than a mere form of imposing a tax, and of implying      nothing except that the licensee shall be subject to no      penalties under national law, if he pays it.' 5 Wall. at page      471.

Appellee would have us say that because there is legislative history  indicating a congressional motive to suppress wagering, this tax is not a proper exercise of such taxing power. In the License Cases, supra, it was admitted that the federal license 'discouraged' the activities. The intent to curtail and hinder, as well as tax, was also manifest in the following cases, and in each of them the tax was upheld: Veazie Bank v. Fenno, 8 Wall. 533, 19 L.Ed. 482 (tax on paper money issued by state banks); McCray v. United States, 195 U.S. 27, 59, 24 S.Ct. 769, 777, 49 L.Ed. 78 (tax on colored oleomargarine; United States v. Doremus, 249 U.S. 86, 39 S.Ct. 214, 63 L.Ed. 493 and Nigro v. United States, 276 U.S. 332, 48 S.Ct. 388, 72 L.Ed. 600 (tax on narcotics); Sonzinsky v. United States, 300 U.S. 506, 57 S.Ct. 554, 81 L.Ed. 772 (tax on firearms); United States v. Sanchez, 340 U.S. 42, 71 S.Ct. 108, 95 L.Ed. 47 (tax on marihuana).

It is conceded that a federal excise tax does not cease to be valid merely because it discourages or deters the activities taxed. Nor is the tax invalid because the revenue obtained its negligible. Appellee, however, argues that the sole purpose of the statute is to penalize only illegal gambling in the states through the guise of a tax measure. As with the above excise taxes which we have held to be valid, the instant tax has a regulatory effect. But regardless of its regulatory effect, the wagering tax produces revenue. As such it surpasses both the narcotics and firearms taxes which we have found valid. 

It is axiomatic that the power of Congress to tax is extensive and sometimes falls with crushing effect on businesses deemed unessential or inimical to the public welfare, or where, as in dealings with narcotics, the collection of the tax also is difficult. As is well known, the constitutional restraints on taxing are few. 'Congress cannot tax exports, and it must impose direct taxes by the rule of apportionment and indirect taxes by the rule of uniformity.' License Tax Cases, supra, 5 Wall. 471.  The remedy for excessive taxation is in the hands of Congress, not the courts. Veazie Bank v. Fenno, 8 Wall. 533, 548, 19 L.Ed. 482. Speaking of the creation of the Bank of the United States, as an instrument for carrying out federal fiscal policies, this Court said in McCulloch v. Maryland, 4 Wheat, 316, 423, 4 L.Ed. 579.

'Should Congress, in the execution of its powers, adopt      measures which are prohibited by the constitution; or should      Congress, under the pretext of executing its powers, pass      laws for the accomplishment of objects not entrusted to the      government; it would become the painful duty of this      tribunal, should a case requiring such a decision come before      it, to say that such an act was not the law of the land. But      where the law is not prohibited, and is really calculated to      effect any of the objects entrusted to the government, to      undertake here to inquire into the degree of its necessity,      would be to pass the line which circumscribes the judicial      department, and to tread on legislative ground. This court      disclaims all pretensions to such a power.'

The difficulty of saying when the power to lay uniform taxes is curtailed, because its use brings a result beyond the direct legislative power of Congress, has given rise to diverse decisions. In that area of abstract ideas, a final definition of the line between state and federal power has baffled judges and legislators.

While the Court has never questioned the above-quoted statement of Mr. Chief Justice Marshall in the McCulloch case, the application of the rule has brought varying holdings on constitutionality. Where federal legislation has rested on other congressional powers, such as the Necessary and Proper Clause or the Commerce Clause, this Court has generally sustained the statutes, despite their effect on matters ordinarily considered state concern. When federal power to regulate is found, its exercise is a matter for Congress.  Where Congress has employed the taxing clause a greater variation in the decisions has resulted. The division in this Court has been more acute. Without any specific differentiation between the power to tax and other federal powers, the indirect results from the exercise of the power to tax have raised more doubts. This is strikingly illustrated by the shifting course of adjudication in taxation of the handling of narcotics.  The tax ground in the Veazie Bank case, supra, recognized that strictly state governmental activities such as the right to pass laws were beyond the federal taxing power.  That case allowed a tax, however, that obliterated from circulation all state bank notes. A reason was that 'the judicial cannot prescribe to the legislative departments of the government limitations upon the exercise of its acknowledged powers.' 8 Wall. at page 548. The tax cases cited above in the third preceding paragraph followed that theory. It is hard to understand why the power to tax should raise more doubts because of indirect effects than other federal powers. 

Penalty provisions in tax statutes added for breach of a regulation concerning activities in themselves subject only to state regulation have caused this Court to declare the enactments invalid.  Unless there are provisions, extraneous to any tax need, courts are without authority to limit the exercise of the taxing power.  All the provisions of this excise are adapted to the collection of a valid tax.

Nor do we find the registration requirements of the wagering tax offensive. All that is required is the filing of names, addresses, and places of business. This is quite general in tax returns.  Such data are directly and intimately related to the collection of the tax and are 'obviously supportable as in aid of a revenue purpose.' Sonzinsky v. United States, 300 U.S. 506, at page 513, 57 S.Ct. 554, at page 555. The registration provisions make the tax simpler to collect.

Appellee's second assertion is that the wagering tax is unconstitutional because it is a denial of the privilege against self-incrimination as guaranteed by the Fifth Amendment.

Since appellee failed to register for the wagering tax, it is difficult to see how he can now claim the privilege even assuming that the disclosure of violations of law is called for. In United States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037, defendant was convicted of refusing to file an income tax return. It was assumed that his income 'was derived from business in violation of the National Prohibition Act'. 274 U.S. at page 263, 47 S.Ct. at page 607. 'As the defendant's income was taxed, the statute of course required a return. See United States v. Sischo, 262 U.S. 165, 43 S.Ct. 511, 67 L.Ed. 925. In the decision that this was contrary to the Constitution we are of opinion that the protection of the Fifth Amendment was pressed too far. If the form of return provided called for answers that the defendant was privileged from making he could have raised the objection in the return, but could not on that account refuse to make any return at all.' 274 U.S. at page 263, 47 S.Ct. at page 607.

Assuming that respondent can raise the self-incrimination issue, that privilege has relation only to past acts, not to future acts that may or may not be committed. 8 Wigmore (od ed., 1940) § 2259(c). If respondent wishes to take wagers subject to excise taxes under § 3285, supra, he must pay an occupational tax and register. Under the registration provisions of the wagering tax, appellee is not compelled to confess to acts already committed, he is merely in formed by the statute that in order to engage in the business of wagering in the future he must fulfill certain conditions. 

Finally, we consider respondent's contention that the order of dismissal was correct because a conviction under the sections in question would violate the Due Process Clause because the classification is arbitrary and the statutory definitions are vague.  The applicable definitions are 26 U.S.C. (Supp. V) § 3285(b), (d) and (e), 26 U.S.C.A. § 3285(b, d, e).  The arbitrariness is said to arise from discrimination because some wagering activities are excluded. The Constitution does not require that a tax statute cover all phases of a taxed or licensed business.  Respondent predicates vagueness of the statute upon the use, in defining the subject of the tax, of the description 'engaged in the business' of wagering and 'usually' in § 3285(b) (2). We have no doubt the definitions make clear the activities covered and excluded.

Reversed. 

Notes