ON A COMMON MEASURE OF VALUE IN DIRECT TAXATION. 221 



income and source's outgoings, and the more the source is impaired in 

 value, the larger is the proportion of these outgoings in its composition, 

 whilst the greater also will be its nominal excess above true income. 

 From these considerations the Committee arrived at the following simple 

 rule of general application : — " Deduct from the income as at present 

 returned the outgoings that belong to its production, and the remainder 

 will be its taxable amount." 



III. Under such a rule, taxable income would not as at present be 

 land-rent, house-rent, labour-wages, &c, but land-rent minus land- 

 outgoings, house-rent minus house-outgoings, labour-wages minus 

 labour-outgoings, &c. These outgoings are for the most part the 

 sequels of productive wear, tear, and depreciation, involving cost of 

 repairs, maintenance, or replacement either of the source itself or of its 

 value. By their deduction the source's value considered as a capital or 

 principal, is maintained unimpaired, and the income left which would 

 always bear the same relation to source that interest bears to principal, 

 was called the source's "interest value," and was adopted as the common 

 measure of assessment. The plan of the Committee might indeed be 

 shortly summed up as the conversion of sources and incomes generally 

 to the form of principal and interest by uniform deduction of source's 

 outgoings, and might be indifferently denned as, " Taxation of the 

 Interest value," "Non-taxation of the Principal value as Income," 

 "Exemption of Essential Outgoings," three equivalent expressions, each 

 one absolutely involving the other. 



IV. Incomes in their positive or source aspect as the object of direct 

 assessment and interest value as the assessment's common measure — 

 such are then the chief conclusions of the last Report. In the present 

 inquiry, keeping this object and this measure distinctly in mind, and keep- 

 ing clear of all purely personal aspects, whether those of personal tenure 

 or of personal necessities, the Committee propose to determine more fully 

 the method and practicability of applying this measure to the chief cases 

 of actual Income and to append an approximate schedule of results. 



V. The rule of procedure in general is evidently that already given 

 for finding interest value, viz., " Deduct from the income as at present 

 returned all the outgoings that belong to its production," or speaking 

 independently of the Income Tax and its returns : " Deduct from the 

 total receipts of any given source, the total cost of producing them, and 

 the difference will be its interest value on taxable income." This being 

 the rule, all that will be necessary for its particular application will be a 

 knowledge of the receipts, and a knowledge of the outgoings or costs in 

 each case in question. What are the costs to which land, houses, and 

 mines are naturally subject in producing rents and royalties ? What 

 are the costs to which ships, machinery, horses, cattle, vehicles, trade 

 fixtures and furniture, railways, mills, and manufactories, in a word 

 capital whether fixed or circulating, are subject in producing profits ? 

 What are the costs to which labour, whether of offices, of professions, or 

 of trades is subject in producing salaries, fees, or wages ? These costs 

 consist as before stated of the source's outgoings through work, wear, 

 and tear, and through depreciation in value by age and exhaustibility, 

 and equally with that of the source's receipts a knowledge of them is 

 implied in every comparison of values and is indeed the indispensable 

 condition of all rational accounts. 



VI. Fortunately, however, the practicability of finding and deducting 



