92 ON TAXATION 



as principal and interest. If we think the matter 

 out, the general rule holds good here as else- 

 where. For this principal is in reality some 

 part of a living form of industry, or of a loan 

 which has been raised by the directorate of 

 such an industry or by a national Government. 

 All industrial profits are made by the destruc- 

 tion of capital and the birth of fresh capital. 

 Interest is merely a part of such industrial 

 profits. In simple words, then, principal appears 

 to live because it is continually replaced. 



Speaking generally, an old Government loan, 

 though it may be occasionally represented by a 

 living industry, such as a national railway, is 

 usually only so much promise to pay interest 

 annually, the amount originally borrowed being 

 long gone in various directions. The interest, 

 when paid, is obtained by duties and taxes. 

 These come out of profits and savings, and are 

 the consequence, therefore, of the creation of 

 capital by the destruction of capital in the 

 ordinary way. 



For whatever purpose it is required, all the 

 revenue obtained by Government is obtained 

 in one way, by annexing capital. Let us suppose 

 an income-tax is levied : that is an annexation 

 of capital. If a man, out of an income of a 

 thousand pounds a year, spend eight hundred 

 pounds, he would naturally reinvest, so as to 

 increase his principal, the balance of two 

 hundred pounds. If a part of this, instead of 

 being reinvested, be paid over to the tax- 

 gatherer, then that payment is made from 



