UNITED STATE v. KAHRIGER.

The issue raised by this appeal is the constitutionality of the occupational tax provisions of the Revenue Act of 1951,1 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,2 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 history3 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.4

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. 471.5 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.6 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.7 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.8 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.9

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.10 Unless there are provisions, extraneous to any tax need, courts are without authority to limit the exercise of the taxing power.11 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.12 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.13

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.14 The applicable definitions are 26 U.S.C. (Supp. V) § 3285(b), (d) and (e), 26 U.S.C.A. § 3285(b, d, e).15 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.16 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.

Mr. Justice JACKSON, concurring.

I concur in the judgment and opinion of the Court, but with such doubt that if the minority agreed upon an opinion which did not impair legitimate use of the taxing power I probably would join it. But we deal here with important and contrasting values in our scheme of government, and it is important that neither be allowed to destroy the other.

On the one hand, the Fifth Amendment provides that no person 'shall be compelled in any criminal case to be a witness against himself'. This has been broadly construed to confer immunity not only 'in any criminal case' but in any federal inquiry where the information might be useful later to convict of a federal crime. Extension of the immunity doctrines to the federal power to inquire as to income derived from violation of state penal laws would create a large number of immunities from reporting which would vary from state to state. Moreover, the immunity can be claimed without being established, otherwise one would be required to prove guilt to avoid admitting it. Sweeping and undiscriminating application of the immunity doctrines to taxation would almost give the taxpayer an option to refuse to report, as it now gives witnesses a virtual option to refuse to testify. The Fifth Amendment should not be construed to impair the taxing power conferred by the original Constitution, and especially by the Sixteenth Amendment, further than is absolutely required.

Of course, all taxation has a tendency proportioned to its burdensomeness to discourage the activity taxed. One cannot formulate a revenue-raising plan that would not have economic and social consequences. Congress may and should place the burden of taxes where it will least handicap desirable activities and bear most heavily on useless or harmful ones. If Congress may tax one citizen to the point of discouragement for making an honest living, it is hard to say that it may not do the same to another just because he makes a sinister living. If the law-abiding must tell all to the tax collector, it is difficult to excuse one because his business is law-breaking. Strangely enough, Fifth Amendment protection against self-incrimination has been refused to business as against inquisition by the regulatory power, Shapiro v. United States, 335 U.S. 1, 68 S.Ct. 1375, 92 L.Ed. 1787, in what seemed to me a flagrant violation of it. See dissenting opinion, 335 U.S. at page 70, 68 S.Ct. 1410.

But here is a purported tax law which requires no reports and lays no tax except on specified gamblers whose calling in most states is illegal. It requires this group to step forward and identify themselves, not because they like others have income, but because of its source. This is difficult to regard as a rational or good-faith revenue measure, despite the deference that is due Congress. On the contrary, it seems to be a plan to tax out of existence the professional gambler whom it has been found impossible to prosecute out of existence. Few pursuits are entitled to less consideration at our hands than professional gambling, but the plain unwelcome fact is that it continues to survive because a large and influential part of our population patronizes and protects it.

The United States has a system of taxation by confession. That a people so numerous, scattered and individualistic annually assesses itself with a tax liability, often in highly burdensome amounts, is a reassuring sign of the stability and vitality of our system of self-government. What surprised me in once trying to help administer these laws was not to discover examples of recalcitrance, fraud or self-serving mistakes in reporting, but to discover that such derelictions were so few. It will be a sad day for the revenues if the good will of the people toward their taxing system is frittered away in efforts to accomplish by taxation moral reforms that cannot be accomplished by direct legislation. But the evil that can come from this statute will probably soon make itself manifest to Congress. The evil of a judicial decision impairing the legitimate taxing power by extreme constitutional interpretations might not be transient. Even though this statute approaches the fair limits of constitutionality, I join the decision of the Court.

Mr. Justice FRANKFURTER, dissenting.

The Court's opinion manifests a natural difficulty in reaching its conclusion. Constitutional issues are likely to arise whenever Congress draws on the taxing power not to raise revenue but to regulate conduct. This is so, of course, because of the distribution of legislative power as between the Congress and the State Legislatures in the regulation of conduct.

To review in detail the decisions of this Court, beginning with Veazie Bank v. Fenno, 8 Wall. 533, 19 L.Ed. 482, dealing with this ambivalent type of revenue enactment, would be to rehash the familiar. Two generalizations may, however, safely be drawn from this series of cases. Congress may make an oblique use of the taxing power in relation to activities with which Congress may deal directly, as for instance, commerce between the States. Thus, if the dissenting views of Mr. Justice Holmes in Hammer v. Dagenhart, 247 U.S. 251, 277, 38 S.Ct. 529, 533, 62 L.Ed. 1101, had been the decision of the Court, as they became in United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609, the effort to deal with the problem of child labor through an assertion of the taxing power in the statute considered in Child Labor Tax Case, 259 U.S. 20, 42 S.Ct. 449, 66 L.Ed. 817, would by the latter case have been sustained. However, when oblique use is made of the taxing power as to matters which substantively are not within the powers delegated to Congress, the Court cannot shut its eyes to what is obviously, because designedly, an attempt to control conduct which the Constitution left to the responsibility of the States, merely because Congress wrapped the legislation in the verbal cellophane of a revenue measure.

Concededly the constitutional questions presented by such legislation are difficult. On the one hand, courts should scrupulously abstain from hobbling congressional choice of policies, particularly when the vast reach of the taxing power is concerned. On the other hand, to allow what otherwise is excluded from congressional authority to be brought within it by casting legislation in the form of a revenue measure could, as so significantly expounded in the Child Labor Tax Case, supra, offer an easy way for the legislative imagination to control 'any one of the great number of subjects of public interest, jurisdiction of which the states have never parted with * * *.' Child Labor Tax Case, 259 U.S. at page 38, 42 S.Ct. at page 451, I say 'significantly' because Mr. Justice Holmes and two of the Justices who had joined his dissent in Hammer v. Dagenhart, McKenna and Brandeis, JJ., agreed with the opinion in the Child Labor Tax Case. Issues of such gravity affecting the balance of powers within our federal system are not susceptible of comprehensive statement by smooth formulas such as that a tax is nonetheless a tax although it discourages the activities taxed, or, that a tax may be imposed although it may effect ulterior ends. No such phrase, however fine and well-worn, enables one to decide the concrete case.

What is relevant to judgment here is that, even if the history of this legislation as it went through Congress did not give one the libretto to the song, the context of the circumstances which brought forth this enactment—sensationally exploited disclosures regarding gambling in big cities and small, the relation of this gambling to corrupt politics, the impatient public response to these disclosures, the feeling of ineptitude or paralysis on the part of local law-enforcing agencies—emphatically supports what was revealed on the floor of Congress, namely, that what was formally a means of raising revenue for the Federal Government was essentially an effort to check if not to stamp out professional gambling.

A nominal taxing measure must be found an inadmissible intrusion into a domain of legislation reserved for the States not merely when Congress requires that such a measure is to be enforced through a detailed scheme of administration beyond the obvious fiscal needs, as in the Child Labor Tax Case, supra. That is one ground for holding that Congress was constitutionally disrespectful of what is reserved to the States. Another basis for deeming such a formal revenue measure inadmissible is presented by this case. In addition to the fact that Congress was concerned with activity beyond the authority of the Federal Government, the enforcing provision of this enactment is designed for the systematic confession of crimes with a view to prosecution for such crimes under State law.

It is one thing to hold that the exception, which the Fifth Amendment makes to the duty of a witness to give his testimony when relevant to a proceeding in a federal court, does not include the potential danger to that witness of possible prosecution in a State court, Brown v. Walker, 161 U.S. 591, 606, 16 S.Ct. 644, 650, 40 L.Ed. 819 and, conversely, that the Fifth Amendment does not enable States to give immunity from use in federal courts of testimony given in a State court. Feldman v. United States, 322 U.S. 487, 64 S.Ct. 1082, 88 L.Ed. 1408. It is a wholly different thing to hold that Congress, which cannot constitutionally grapple directly with gambling in the States, may compel self-incriminating disclosures for the enforcement of State gambling laws, merely because it does so under the guise of a revenue measure obviously passed not for revenue purposes. The motive of congressional legislation is not for our scrutiny, provided only that the ulterior purpose is not expressed in ways which negative what the revenue words on their face express and, which do not seek enforcement of the formal revenue purpose through means that offend those standards of decency in our civilization against which due process is a barrier.

I would affirm this judgment.

Mr. Justice DOUGLAS, while not joining in the entire opinion, agrees with the views expressed herein that this tax is an attempt by the Congress to control conduct which the Constitution has left to the responsibility of the States.

Mr. Justice BLACK, with whom Mr. Justice DOUGLAS concurs, dissenting.

The Fifth Amendment declares that no person 'shall be compelled in any criminal case to be a witness against himself'. The Court nevertheless here sustains an Act which requires a man to register and confess that he is engaged in the business of gambling. I think this confession can provide a basis to convict him of a federal crime for having gambled before registration without paying a federal tax. 26 U.S.C. (Supp. V) §§ 3285, 3290, 3291, 3294, 26 U.S.C.A. §§ 3285, 3290, 3291, 3294. Whether or not the Act has this effect, I am sure that it creates a squeezing device contrived to put a man in federal prison if he refuses to confess himself into a state prison as a violator of state gambling laws.* The coercion of confessions is a common but justly criticized practice of many countries that do not have or live up to a Bill of Rights. But we have a Bill of Rights that condemns coerced confessions, however refined or legalistic may be the technique of extortion. I would hold that this Act violates the Fifth Amendment. See my dissent in Feldman v. United States, 322 U.S. 487, 494—503, 64 S.Ct. 1082, 1085—1089, 88 L.Ed. 1408.