142 FOREST VALUATION 



tions from gross income. A tax levied on gross income must of 

 necessity be at a lower rate than one levied on net income, and 

 is more easily computed. But net income is a more scientific 

 basis of taxation since the net, after subtracting expenses inci- 

 dental to securing it, is the only portion of gross income which 

 becomes the property of the owner available to meet taxes. 



151. Tax on Value of Property. Value of property is de- 

 rived from net income ( 64) and may therefore be taxed directly, 

 without injustice, provided the assessed value of the property 

 does not exceed its expectation or capital value, and the rate 

 of taxation on this capital value bears the proper ratio to the 

 legitimate tax on income. 



This ratio is dependent on the rate of interest used as the 

 standard for determining the capital value (p per cent). The 

 annual equivalent of intermittent income may always be found 

 (XIII). The relation between this annual income and value is 



,,. , Income 



Value = 



.op 



T , IO 



= Income X 



The expression is the ratio between a tax on income and on 



P 

 capital value. It follows that a tax equal to a per cent of value 



must take X a per cent of income. A tax rate of 10 mills, or 



P 

 i per cent, when the rate of interest is 5 per cent, will require 



X i per cent, or 20 per cent of the income, while a 2o-mill tax 



absorbs 40 per cent of income. With a rate of interest of 10 

 per cent the proportion of taxes to income would in this case be 

 respectively 10 per cent and 20 per cent. 



The amount of the annual tax is the product of the assessed 

 value and the tax rate. The annual tax, rather than either the 

 rate or the assessed value alone, determines the relative per cent 

 of income demanded. A low valuation permits a proportion- 

 ally higher tax rate, while high tax rates may be lowered with 



