60 BOARD OF AGRICULTURE. 



dition there becomes an obligation or credit due to the holder of 

 the mortgage." 



In the case supposed the mortgage or note which the mortgage 

 secures, held by B, is a credit for $5,000. He is taxable upon it 

 as a credit. Should A prove insolvent and B take possession of 

 the property, the mortgage and note still held by B are wortliless 

 as a credit and hence cease to be taxable. He is now assessed 

 " upon the land of which he is in possession and in respect to 

 which he has ability'." By this method the assumed basis of taxa- 

 tion is the value of property held — a principle in itself ^af^, and its 

 application practicable. 



Income Tax. — Political economists generally agree that the 

 true theory of taxation is that which derives all revenue for public 

 purposes by an assessment upon incomes rather than upon prop- 

 erty real or personal, inasmuch as the net income of individuals 

 is an exact measure of their ability to contribute to the public 

 expenditures. There may be practical difficulties in the way of 

 adopting such a method of taxation as a whole, but it does seem 

 as though it ought to supplement any other method, otherwise 

 many persons escape taxation whose ability is equal to that of 

 their neighbors, who in consequence have more than proportional 

 burdens to bear. A earns $5,000 in a year and invests it in a 

 farm, on which he afterwards pays annual taxes ; B earns $5,000 

 in a year and invests it in United States bonds, exempt from taxa- 

 tion, and thus evades a contribution to the common charges. A 

 tax on income secures a contribution from each individual accord- 

 ing to his ability. Such a tax should not be limited to money 

 earned by a trade or profession, but should apply to all incomes 

 from whatever source. 



The objection on the ground of inequality, to taxing incomes 

 derived from business requiring capital which is taxed as prop- 

 erty, is met by allowing a deduction from the gross income of a 

 certain per cent, (six per cent., for example) of the assessed value 

 of property from which the income is derived. An exemption of 

 perhaps a thousand dollars, or at least an amount sufficient to 

 cover the ordinary living expenses of an average family, would 

 be in accordance with the theory upon which exemptions in gen- 

 eral are made. The " inquisitorial " system obtains not more in 

 the taxing of incomes than in the levying of a tax at all on invis- 

 ble property. Unless the system of taxing personal property be 



