1. United States v. Kahriger, (1953)
2. Facts: The Revenue Act of 1951 contained a 10% occupational tax on persons engaged in the business of accepting wagers (professional interstate gamblers). It also required these persons to keep a list of the names, and addresses of all employees for public inspection at any time by any state county or municipal agency. In the discussions in the Congressional record, there was evidence that one of the primary purposes was to tax these professional gamblers out of existence.
3. Procedural Posture: The lower court found this provision beyond the taxing power of the Congress.
4. Issue: Whether Congress has the power, under the taxing power, to enact a tax on a particular profession if the tax also has a regulatory effect which appears to infringe on the states’ police power under the 10th amendment.
5. Holding: Yes.
6. ∏ Argument: The legislative history indicating a congressional motive to suppress wagering indicates that this is a tax passed under a pretext of revenue generation and thus is not a proper exercise of the taxing power. The sole purpose of the law is to penalize gamblers. The revenue generation pretext is evidenced by the small amount of revenue actually generated. Furthermore, a the law requires the gamblers to record and present upon demand the names and addresses of their employees, which is clearly an attempt to regulate this occupation.
7. Majority Reasoning: A federal excise tax is not invalid merely because it discourages or deters the activities taxed. Nor is it invalid because the revenue generated is negligible. If a tax produces revenue, and unless there are penalty provisions extraneous to any tax need, the courts are without authority to limit the exercise of the taxing power. This tax is not a penalty, therefore it is valid. The registration requirement simply aids in the collection of the tax.
