THE HABITATION TAX 71 
Theoretically, the income tax is regarded as approaching most nearly 
to the principle of ability, and for a number of years this tax has been 
expected to furnish the means of escape from the inequalities in the 
taxation of general property. Increasing study of the abuses inherent 
in the practical operation of the income tax in those countries where it 
has become a settled part of the fiscal system has weakened the faith in 
' the efficiency of this tax to reach considerable classes of personal property. 
When the income tax is applied on the principle of stoppage at source— 
taking the tax out of the dividends before they are paid to the stockholder 
—it has proven successful. Its greatest defect is in the fact that it must 
rely upon the declaration of the taxpayer as to the amount of his income 
derived from investments in notes, mortgages, bonds, and other securities 
to which the principle of stoppage at source cannot be applied. In the 
ascertainment of this part of the income, the tax has become subject to 
abuse. In so far as the income tax is successful, much the same result is 
now obtained in some of the American states by the use of corporation 
taxes. Thus, while the practical results of the income tax are secured 
in the taxation of corporate property, the tax on rentals has been pro- 
posed in the endeavor to reach that species of property not effectively 
reached either by taxes on income or corporations. 
The expenditure for house rent is generally some indication of the 
occupant’s income. It is true it is not an absolute measure of income, 
but in a general way, differences in rent tend to approximate dif- 
frences in tax-paying ability. Normal persons are fond of material 
comforts and luxuries, and an increase in income generally expresses 
itself at once in larger and more elaborate homes. It is also claimed 
that the habitation tax reaches funded income and taxes it at a higher 
rate than income from services, such as the income of lawyers and physi- 
cians.‘ In all schemes of income taxation an effort is made to make 
this discrimination so as to avoid the hardship in taxing income derived 
from service at the same rate as income derived from government bonds 
or other permanent investments. The tax on rentals, it is said, reaches 
income from investments and taxes it at a higher rate than income from 
service because, in so far as the residence is the index of income, it is 
t Leroy-BEAvLIEv, Traiié de la science des finances, Part I, Book II, chap. vii. 
