34 REPORT — 1S76. 



perhaps a sense of the fitness of things indicates, that for any given year the 

 claim and debt will cancel each other, and leave every year's possession to 

 pay the whole year's tax on the estate possessed. 



Difference between incomes from terminable tenures and tJiose from termi- 

 nable things. — That a terminable income by paying at the same annual rate as 

 a perpetual income is equally paying according to its capital-value, is a pro- 

 position insisted on by Mr. AVarburton and by Mr. Mill in the two Commissions 

 on the Income-tax ; and as far as the above class of terminable income is 

 concerned, the proposition is true. But these gentlemen unfortunately 

 carried it into a region where it had no status, and iu virtue of it denied the 

 applicability of capital-value, if not of arithmetical proportion generally, as 

 a reforming measure of the income-tax. As there are incomes and incomes, 

 so there are terminable incomes and terminable incomes. If the terminable 

 income be the terminable tenure of a pure interest-value, such, practically 

 speaking, as a life-interest in land or iu consols, to tax it at the same rate 

 as a permanent income is to tax each according to its capital-value. If, 

 however, the terminable income be an income that is made up partly of 

 interest-value and partly of capital that terminates, not simply as a legal 

 right, but by gradually exhausting its source, then to charge such income at 

 the same annual rate as a permanent one of similar amount is not to tax it 

 according to its capital-value — a truth repeatedly demonstrated by the 

 actuaries before Mr. Hume's committee, and evident from the reflection that 

 the capital-value of the source is, by the very nature of the income, continu- 

 ally passing away, whilst the tax remains the same. Under the conditions 

 stated, the tax on the one terminable income would be a tax on pure 

 interest-value, the tax on the other would bo a tax on a mixture of interest- 

 value ^j7its capital. By combining the propositions of the actuaries and of 

 Mr. Warburton, each true in its own sphere, but each erroneous when 

 applied to the other, we may conclude that the results obtained from the 

 capitalization of tenures are identical with those obtained from the absolute 

 valuation of sources ; and both may be quoted in confirmation of those 

 obtained from the principle of interest-value. 



Capital-value in relation to 'personal riches and property. Common measure 

 of value as needful for equal exemption as for equal taxation. — Another appli- 

 cation of capital-value as a measure, however, cannot be so quoted. The 

 taxation of a particular property according to capital-value may be inter- 

 preted as taxation, not according to the worth of that particular property, 

 but according to the absolute worth or financial position of the person who 

 owns it ; and siich a method of levy has been erroneously defended as 

 taxation according to ability. In this view a rich man ought (considerations 

 of practicability apart) to pay a heavier duty upon his dog, liis bottle of wine 

 or whiskey, than a poor man ; and, the estates being equal, the owner of a 

 permanent tenure would pay more for each year's possession than would the 

 owner of a limited one. Such a theory of capital-value may not be general, 

 but it has a certain degree of popiilarity, and seems to be constantly getting 

 itself mixed up not only with discussions but even with legislation .on the 

 incidence of the income-tax. It may be questioned whether the operation of 

 this theory is not visible, for example, in the exemption from imperial direct 

 taxation (recently so largely extended) of large masses of property in the 

 country including many thousands of acres of land, in consequence of the 

 accident of their ownership. Property thus exempted becomes property 

 taxable by mere change of possession, irrespective of the intrinsic nature or 

 value of the property itself. To exempt in an income-tax the necessary 



