Steinberg v. United States

• Decision Date: 01 June 1926
• Docket Number: No. 236.,236.
• Citation: 14 F.2d 564
• Parties: STEINBERG v. UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

14 F.2d 564 (1926)

STEINBERG v. UNITED STATES.

No. 236.

Circuit Court of Appeals, Second Circuit.

June 1, 1926.

Robert D. Elder and Otho S. Bowling, both of New York City, for plaintiff in error.

Emory R. Buckner, U. S. Atty., of New York City (David P. Siegel, Ben Herzberg, and William D. Whitney, Asst. U. S. Attys., all of New York City, of counsel), for the United States.

Before HOUGH, MANTON, and HAND, Circuit Judges.

HOUGH, Circuit Judge (after stating the facts as above).

Of the evidence herein it is enough to say that there was testimony that Steinberg had said that during 1921 he did acquire more money by dealing in illicit liquor than the amount which he reported as his income for that year; but there was no evidence sufficient to go to the jury tending to show that he had received any particular or specified number of dollars as such gains. As for the charge that during the year 1921 his "net income * * * was a certain amount, to wit, the sum of $760,635.43," had the indictment been a complaint for that sum, plaintiff ought to have been nonsuited.

For discussion of the legal point to be next stated, we shall assume that the foregoing was not a variance, and that, the amount (if material) having been laid with a videlicet, proof of any substantial excess over his reported income was sufficient, although the practice of exciting, if not inflaming, jurymen by parading visions of money enormously in excess of anything capable of legal proof cannot be approved. Juries are not ordinarily acquainted with the technical virtues of "to wit."

The legal point is that such unlawful gains as the evidence tended to show Steinberg receiving are not "income" within the meaning of the act of 1921. That the winnings of a professional gambler, the loot of a burglar, the bribes of a dishonest official, the wages of a prostitute, or the profits of any criminal commerce should not be regarded as income, but should for reasons of public policy be regarded as beneath the contempt of the law, is a proposition not without attraction.

If they constitute income within the meaning of the law, it must follow that, in the language of section 214 of the act (Comp. St. Ann. Supp. 1923, § 6336 1/8g), the "net" or taxable portion thereof must be reached by deducting "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business"; wherefore whoever for profit maintains a saloon, brothel, or "fence" would have good right to claim as lawful deductions those bribes for "protection" which are a notorious part of the profitable exercise of such vocations. The moral degradation, arising from endeavor by law to collect a necessarily lawful tax out of occupations by equal necessity unlawful, corrupting, and immoral, may well give one pause.

It is true that a distinction may be drawn between the profits of an embezzlement, a robbery, or a burglary (Rau v. United States, 260 F. 136, 171 C. C. A. 167), and those of sales of liquor, or plumes from birds of paradise, both of which are at present under rather similar bans; but there remains a long list of unlawful and profitable occupations in which the proprietor has that legal title to his illegal profits which the thief has not.

But these considerations of civic morals, however potent they should be in the Legislature or with prosecuting officers, who are required to choose and not abuse their weapons against crime, the courts are bound to administer the law as it is found, regardless of considerations of morals, policy, or taste, suitable for the legislative or executive branches. Our duty and our only power is to ascertain what the Legislature means by what it has said, and then enforce what was said.

It is unfortunate that, even in briefs and at bar the phrase "income tax" is continually used as though, under a statute imposing a tax even called by that name, nothing but what lexicographers mean by the word can be taxed. This is an assumption fundamentally erroneous, for it disregards the legislative power of definition.

If the state has authority to tax, regulate, or prohibit something described in ordinary language, and not by some term of technical art, the same authority may define — i. e., delimit or extend — the meaning of that which is to be taxed or regulated. Of this the allsufficient instance at present is the phrase "intoxicating liquors," the key words of the Eighteenth Constitutional Amendment. The power of Congress to define or extend (it makes no difference which) the meaning of that phrase, so as to cover beverages confessedly not intoxicating, is too well known to require comment. If Congress can lawfully make and enforce a definition which is an admitted falsehood, as it now does, it can assuredly extend the meaning of the word "income" to cover items beyond the definition of any dictionary.

This has been done by section 213 (42 Stat. 238 Comp. St. Ann. Supp. 1923, § 6338 1/8ff), which declares that "gross income" shall include "gains, profits and income derived from * * * professions, vocations, trades, businesses, commerce or sales * * * or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever."

On the face of this statute, which in defining "gross income" extends the phrase to cover "gains and profits," as contradistinguished from income, we have no doubt that Congress meant to levy a contribution upon every species of gain, no matter how immoral or vicious the method of acquiring the same might be.

That a given sinner or criminal must, in the pursuit of his or her prohibited vocation, break many laws to obtain the wherewithal to satisfy the taxing law, must be regarded as immaterial, for the whole matter is covered by one remark of Holmes, J., in United States v. Stafoff, 260 U. S. 477, 43 S. Ct. 197, 67 L. Ed. 358: "Of course Congress may tax what it also forbids." This is compendious enough, and was said about liquor; and equally is it of course that, if the Legislature can tax the liquor which it forbids, it can also tax the gains made by dealing in that which is forbidden. We are not concerned with how these singular results are to be obtained; for it is further of course that he who makes unlawful gains cannot lawfully be required to divulge how he made them. This difficulty is so obvious that it must have been considered, even by the lawmakers.

It hardly needs mention that the record before us, common knowledge of prosecuting methods, and the comment of the court in sentencing this man clearly show that Steinberg was indicted, not to enforce a revenue law, nor penalize him for failing to comply with one, but to punish severely for dealing largely in liquor. As we pointed out in Vanatta v. United States, 289 F. 424, the prohibition statute makes no difference between the sale, possession, or transportation of a bottle of liquor, and the same acts in relation to a shipload; wherefore, as Congress has furnished weapons appropriate for frontal attack only against small fry, endeavor is made to net the larger fish in the meshes of revenue, customs, and tax laws, with the ever-useful conspiracy statute in reserve for a plurality of wrongdoers. The question is not whether this is wise or politic, fair or in good taste, but whether it can legally be done. We think it can under the language of the statutes, and know that similar things have been done for generations.

In Harford v. United States, 8 Cranch, 109, 3 L. Ed. 504, it was held proper to punish a man for not procuring a permit to bring into the country what the embargo prohibited him from bringing in at all.

Marks v. United States, 196 F. 476, 116 C. C. A. 250, is one of many reported instances of indictments for manufacturing smoking opium without license and bond, long after all such opium was absolutely forbidden.

The so-called Harrison Act (Comp. St. §§ 6287g-6287q), upheld in United States v. Doremus, 249 U. S. 86, 39 S. Ct. 214, 63 L. Ed. 493, though now doubted in United States v. Daugherty, 269 U. S. 360, 46 S. Ct. 156, 70 L. Ed. 309, furnishes a perfect example of deliberate legislative invention of a pretended revenue law for the purpose of enforcing moral ideas. This is going much further than attempting to use old statutes for the indirect invigoration of new ones. The action of Congress after United States v. Yuginovich, 256 U. S. 450, 41 S. Ct. 551, 65 L. Ed. 1043, and the treatment thereof in Stafoff v. United States, supra, is illuminating as to legislative leanings and judicial treatment thereof.

Thus we hold that the unknown increment above the sum reported for 1921 as Steinberg's income was taxable, and he was punishable for concealing the facts under section 253 of the statute. As the result of reargument on the point, we are compelled to reject one proposition that prevailed originally, viz. that the Income Tax Act of 1921 by section 253 has, so far as indictments for perjury in tax returns under the statute are concerned, repealed section 125, Criminal Code.

We overlooked, and have been reminded of, the rule that the crime of perjury in an affidavit is complete the moment the oath is taken with the necessary intent. It is immaterial and irrelevant that the false affidavit is never used. 2 Bish. Cr. Law (9th Ed.) §§ 1028 and 1055; The King v. Crossley, 7 T. R. 315; Rex v. White, Mood. & M. 271; The Queen v. Vreones, 1891 1 Q. B. 360; Commonwealth v. Carel, 105 Mass. 582. And cf. United States v. Rhodes (C. C.) 30 F. 431; Berry v. United States, 259 F. 203, 170 C. C. A. 271. It is quite impossible to imagine how one who had taken a false oath to a tax return could by means of the same attempt to defeat or evade the tax, without using — i. e., tendering — said return to the Treasury.

It follows that one crime is complete when the oath is taken, which crime grows out of the oath, and another is complete when the false instrument is used for the...