I don't know about that. There's a long history of litigation at the Federal level dealing with income taxation of illegal activities. The courts have generally agreed that such taxation is legal. Heck, Congress even mandated that drug dealers can't deduct business expenses besides the actual costs of the "goods" -- i.e. no deductions for advertising expenses. *g* Though, other illegal activities such as prostitution can deduct normal business expenses (I recall reading about a case that dealt with prostitutes' clothing expenses).
I doubt that this judge's argument about self-incrimination hasn't been used by defense lawyers in the past. To be honest, it would be a bad precedent because it would establish the idea that only legal businesses get taxed.
The tax evasion question does offer some parallels, but only addresses undeclared income. However, the Crack Tax requires that the person charged must either admit or deny possession, which is a form self-incrimination and therefore unconstitutional.