Hugo Black

“ In departing from both the Wilcox and Rutkin decisions today, our Brethren offer no persuasive reasons to prove that their judgment in overruling Wilcox is better than that of the Justices who decided that case. It contributes nothing new to the analysis of this problem to say repeatedly that the dishonest man must be subject to taxation just as the honest. As already said, Chief Justice Stone and the others sitting with him on the Wilcox Court fully accepted that general principle and we do still. ”

“ The whole basis of the Wilcox opinion was that an embezzlement is not in itself 'gain' or 'income' to the embezzler within the tax sense, for the obvious reason that the embezzled property still belongs, and is known to belong, to the rightful owner. ”

“ Moreover, for a court to interpret a criminal statute in such a way as to make punishment for past conduct under it so unfair and unjust that the interpretation should be given only prospective application seems to us to be the creation of a judicial crime that Congress might not want to create. This country has never been sympathetic with judge-created crimes. ”

“ Although the victim of either embezzlement or extortion ordinarily has a legal right to restitution, the extortion victim, like a blackmail victim, can in a sense be charged with complicity in bringing about the taxable event in that he knowingly surrendered the funds to the extortionist, sometimes in payment of an actual obligation. ”

“ The injury that the Government would inflict on the lender by making the borrower less able to repay the loan surely would not be adequately compensated by telling the lender that he can take a tax deduction for the loss, and it is equally small comfort to the embezzlement victim for the Government, after taking part of his property as a tax on the embezzler, to tell the victim that he can take a deduction for his loss if he has any income against which to offset the deduction. ”

“ The Court today by implication attributes quite a different meaning or consequence to the Wilcox opinion. One opinion argues at length the 'well-established principle * * * that unlawful, as well as lawful, gains are comprehended within the term 'gross income." Wilcox did not deny that; we do not deny that. This repeated theme of our Brethren is wholly irrelevant since the Wilcox holding in no way violates the sound principle of treating 'gains' of honest and dishonest taxpayers alike. ”

“ The Wilcox case was decided fifteen years ago. Congress has met every year since then. All of us know that the House and Senate Committees responsible for our tax laws keep a close watch on judicial rulings interpreting the Internal Revenue Code. Each committee has one or more experts at its constant disposal. It cannot possibly be denied that these committees and these experts are, and have been, fully familiar with the Wilcox holding. When Congress is dissatisfied with a tax decision of this Court, it can and frequently does act very quickly to overturn it. ”

“ Unlike the victim of an ordinary theft, he generally knows who has taken the property from him and he consents to the taking though under duress; and unlike most victims of embezzlement, he is able to report the taking to law enforcement officers during the taxable year and his failure to do so might be considered a kind of continuing consent to the extortionist's dominion over the property. The longer he acquiesces the less likely it becomes that the extortion victim ever will demand restitution ”

“ Thus, although it was not the law yesterday, it will be the law tomorrow that funds embezzled hereafter are taxable income; and although past embezzlers could not have been prosecuted yesterday, maybe they can and maybe they cannot be prosecuted tomorrow for the crime of tax evasion. (The question of the civil tax liability of past embezzlers is left equally unclear.) We do not challenge the wisdom of those of our Brethren who refuse to make the Court's new tax evasion crime applicable to past conduct. ”

“ We dissent from the way the majority of the Court overrules Wilcox. If the statutory interpretation of 'taxable income' in Wilcox is wrong, then James is guilty of violating the tax evasion statute for the trial court's judgment establishes that he embezzled funds and wilfully refrained from reporting them as income. ”

“ The rightful owner who has entrusted his funds to an employee or agent has troubles enough when those funds are embezzled without having the Federal Government step in with its powerful claim that the embezzlement is a taxable event automatically subjecting part of those funds (still belonging to the owner) to the waiting hands of the Government's tax gatherer. ”

“ There is, of course, one outstanding distinction between a borrower and an embezzler, and that is that the embezzler uses the funds without the owner's consent. This distinction can be of no importance for purposes of taxability of the funds, however, because as a matter of common sense it suggests that there is, if anything, less reason to tax the embezzler than the borrower. ”

“ We said about the proposed exemption of boxing from the antitrust laws that ' (t) heir remedy, if they are entitled to one, lies in further resort to Congress.' [22] That case and that statement fit this case precisely. In fact, as we are about to explain, a far more meaningful distinction can be made between embezzlement and extortion for purposes of this case than it was possible to make between baseball and boxing for purposes of that case, as Mr. Justice FRANKFURTER'S dissenting opinion in that case demonstrates. ”

“ In the first place, a criminal statute that is so ambiguous in scope that an interpretation of it brings about totally unexpected results, thereby subjecting people to penalties and punishments for conduct which they could not know was criminal under existing law, raises serious questions of unconstitutional vagueness. ”

“ In North American Oil, the taxpayer not only had a bona fide claim to the money taxed, but there had been an adjudication that he was entitled to it, and there was only the tenuous possibility that a competing claimant might later upset that adjudication. ”

“ We say part of the owner's funds because it is on the supposed 'gain' from them that the embezzler is now held to be duty-bound to pay the tax and history probably records few instances of independently wealthy embezzlers who have had nonstolen assets available for payment of taxes. ”

“ Rutkin, 3 Cir., 208 F.2d 647, especially Judge Kalodner's dissenting opinion, at page 655; United States v. Rutkin, 3 Cir., 212 F.2d 641, especially at page 644; and Rutkin v. Reinfeld, D.C., 122 F.Supp. ”