ANNEXING CAPITAL 93 



capital ; it is made from that part of capital 

 which would otherwise have become principal. 

 Or let us suppose a duty to be levied on tea. 

 Then either the consumer must pay for his tea 

 an increased price per pound, or the producer 

 must be content to lower his price per pound. 

 In either case the duty is paid from capital. 

 For if the consumer pay more for his tea, he to 

 that extent has a less amount for reinvestment. 

 If the planter obtain a lower price for his tea, 

 his profits are reduced, and he has less money 

 to reinvest, or less with which to improve his 

 factory or his plantation ; so that either way he 

 loses capital. Finally, suppose a Government 

 to raise a revenue by means of death duties. 

 In that case the Government annexes capital, 

 but only in the same way as it does by an 

 income-tax or by a duty on tea. Some men, 

 to meet the death duties, reduce their annual 

 expenditure, and so save the heirs. But the 

 meaning of this procedure is that annually a 

 certain sum is reinvested and becomes principal ; 

 and this principal is the capital the Govern- 

 ment ultimately annexes. Other men care less 

 about their heirs, who consequently receive a 

 diminished capital in the form of principal, the 

 Government having annexed the balance. 



It is this mode of annexing principal which 

 seems to many complainants to imply a living 

 by the nation on its capital, in an objectionable 

 sense. But if we are to be at all accurate in our 

 mode of thinking and expressing our thoughts — 

 and the more frequently we discuss such matters 



