30 EEPORT — 1876. 



economic agencies generally, would be the common measure required. And 

 the measure is a perfectly scientific one, and, indeed, admits of mathematical 

 expression. As the exact difference, comprehensively considered, between 

 the total receipts and total outgoings of a source, it is the pure annual 

 increment of its capital-value, and hence is identical with absolute profit. It 

 would rejiresent the pure annual growth of national wealth taken in its 

 ■widest sense, and the returnable income of national taxation. 



6. Precedents for its practicahility. — But are such deductions of outgoings 

 on the sources of income and the determination of the interest-value practi- 

 cable ? In many cases this question has been already solved by actual 

 legislation. That such deductions are practicable for lands, houses, and 

 mines may be proved by reference to the Metropolis Valuation Act of 1869, 

 and to the Local Valuation Bill before referred to, both of which are grounded 

 on them, and have schedides of deduction for different cases attached. That 

 they are practicable for machines, ships, trade fixtures, horses, and stock 

 generally, the Income-tax Act, with its special clauses for repairs and re- 

 supjjly, itself recognizes ; and though no schedules or deductions are attached 

 for these cases, the deductions are wcU known in the estimates of business 

 and recognized in the Surveyor's office. But if such deductions of outgoings 

 are practicable for the labour of horses, are they not practicable for the labour 

 of men ? Economically considered, the two labours are analogous ; both are 

 productive agents, both have productive powers subject to consumption. 

 Natural risk, maintenance, and terminability belong to the labour of men 

 just as they belong to the labour of horses, just as risk, repairs, and termina- 

 bility belong to machines, ships, or implements. All these outgoings are facts 

 equally ascertained by experience, and it is difficult to see why their valuations 

 are not equally practicable. They are as much an item in a source's general 

 account as the receipts themselves, forming its debit as these form its credit 

 column. Nor can any account, be it individual or national, be said to be 

 complete unless both sides are considered. 



7. Effect on Income-tax Act.- — The application of this interest-value measure 

 to the Income-tax Act would give these results : — Incomes from lands, houses, 

 and mines would be charged much the same as under the proposed new local 

 valuation system. Dividends and profits of capital, pui-ely considered, would 

 be charged as at present. Government and other terminable annuities would 

 not be taxed on the amount representing the restoration of caintal. On the 

 same principle the incomes from labour, whether pure, as in the case of 

 salaried officers and some professors, or mixed with the proceeds of capital, 

 as in other professions and as in businesses, would be entitled to material 

 deductions varying with the relative proportions of skill and capital engaged. 

 In all cases the tax would be collected at the source and levied on the net 

 value of the produce ; and the deductions would be made without reference, 

 as such, either to the position or fortune of the owner. 



8. Practicahility exempJiJied in comjjosite incomes. — Questions may be raised 

 on the practicability of applying an outgoings dcduclion to incomes from 

 businesses and professions which are the mixed results of labour and cajjital. 

 It may be objected either, first, that as labour and capital enter into these 

 mixed incomes in vai-ying proportions, and as the percentage of labour- 

 outgoings is very different from that of capital-outgoings, a deduction common 

 to these mixed incomes and to unmixed labour-incomes would be unjust ; or, 

 secondly, that if the labour-income and capital-income be assessed separately 

 a separate return of capital will be necessary, and that this must entail an 

 objectionable exposure of affairs. To meet the first objection, a classification 



