PRINCIPLES OF TAXATION. 383 



circuity of action is not, moreover, an injury but a gain to those wlio 

 pay the tax. It can not, however, be seriously claimed that a man 

 having $100,000 dollars of productive capital, and receiving from it 

 $4,000 of annual income, is entitled to receive support from the 

 Government as a public pauper. 



An income tax which permits of any exemption whatever is a 

 graduated income tax, not by the rate of the tax but by the amount 

 of the exemption, because all incomes below an arbitrary line are 

 entirely exempt from the tax. Again, in treating of an income tax 

 it should be always borne in mind that, when a Government taxes 

 the income of property, it in reality taxes the property from which 

 the income is derived. In England and on the Continent of Europe 

 land is taxed on its yearly revenue, or income value, and these taxes 

 are always considered as land taxes. Alexander Hamilton, in dis- 

 cussing the taxation of incomes derived directly from property, used 

 this language : " What, in fact, is property but a fiction, without 

 the beneficial use of it? In many instances, indeed, the income is the 

 property itself." (Hamilton's Works, vol. iii, p. 523.) 



As in theory all citizens ought to contribute in proportion to their 

 revenue to the support of the Government under which they have 

 chosen to live and to which they look for protection in respect to their 

 persons and property, the exemption of any from an income tax can 

 only be justified on the assumption of the non-receipt by the citizen 

 of an income beyond what is necessary to defray the expenses of a 

 moderate living. In truth, any exemption under a general income 

 tax is in principle an act of charity on the part of the Government. 

 It is interesting, therefore, to note where the authors or special 

 advocates of the income tax of 1884 proposed to draw the line in 

 respect to charity and as to the amount of property the possession 

 or enjoyment of which, in their opinion, constituted riches. 



If the law exempts from taxation income from property to 

 the extent of $2,000, it in effect exempts property to the caj^ital 

 value of $50,000 from taxation, for at present four per cent is 

 about the average profit of money, land, or other property, over 

 and above all charges and taxes, and at that rate of profit 

 $2,000 will be the annual income value of $50,000. If, however, 

 we asssume five per cent as about the present annual average profit 

 on money, land, or other property in the United States, over and 

 above all charges and taxes, then an exemption of $4,000, the rate 

 fixed upon in the income-tax act of 1884, would represent an accumu- 

 lation, or business, or profession, of the value of $80,000. If we take 

 the rate at which the United States can borrow money — namely, 

 three per cent — then an exemption of $4,000 would represent an 

 accumulation of a citizen, invested in United States securities, of 



