ON COMMON MEASURE OF VALUE IN DIRECT TAXATION. 225 



X. To the question of the mode and practicability of applying the 

 "Common measure of interest-value to cases of property and labour in- 

 come, the above is perhaps a sufficiently detailed answer. In all these 

 -cases the measure is applied to the positive, or source aspect of the in- 

 come, and not to the personal. In all, the deductions are intended to 

 represent the source's average essential outgoings. In all, the interest- 

 value is the excess of receipts over these outgoings, or the principal- value 

 of each source is, by means of the deduction, maintained unimpaired, and 

 hence in a condition to command its future income. The Dr. and Cr. 

 forms appended are exemplars of the modes of making the deductions. 

 They show that the process of making them is merely that of keeping a 

 strictly uniform and just system of accounts, and that any system of 

 accounts that omits them is neither uniform nor just. Moreover, the 

 balance of each account exhibiting the true taxable income, is that alone 

 needful for the return. It is not affirmed that the amount of deduction 

 given in each case is exact, but exactitude — at least insurable exactitude 

 — is purely a question of fact. From the facts obtained in a Government 

 office, for example, it might appear that as in the case of houses the pro- 

 portion of outgoings diminishes as the receipts increase, so would they also 

 in the case of labour. But if so the remedy already applied to one in 

 local assessment would be the remedy for both in imperial assessment, 

 viz., a scale of outgoings relative to such increase of receipts. 



Comparison of the Measures of Interest-value and Capital-value. 



XI. Such is the system of assessment which your Committee recom- 

 mend for adoption. In discussions however on the question of direct 

 assessment, another common measure has often been proposed. It has 

 been proposed to assess incomes, not according to their real annual or 

 interest value, but according to their total or capital value, or in other 

 words according to the present money value to which they are equivalent, 

 ■and from which they might be supposed to be derived. Valuation by 

 capital value, capitalisation as it is called, finds a common measure and 

 expression in the numbers defining what is called the years' purchase of 

 the income. Thus an income valued at 25 years' purchase, ceteris 

 paribus, is worth twice as much as one valued at 12^ years' purchase, and 

 in the system of capital- value would be taxed twice as much. The figure 

 defining the years' purchase of an income, is thus at once an index or 

 measure of an income's value and of its assessability. As this system is 

 a simple, popular, and well understood mode of valuation, it will be useful 

 to consider and compare the results it gives with those of interest-value, 

 and this comparison can be made by means of the annexed table (p. 226). 

 The first column expresses the series of incomes equal in present value, 

 but varying in annual amount, from £4 per cent, up to J20, a variation 

 that might evidently be extended either way, and this column alone is 

 •sufficient to show the lack of consciousness, if not of conscience, in taxing 

 incomes according to abstract annual amount. The second column 

 expresses the capital value of each of these incomes in years' purchase of 

 its annual amount. Under the supposition of a £4 per cent, normal rate 

 of interest, the third column shows the percentage amount of source's 

 ■outgoings in, and of the consequent deduction from each income, and the 

 fourth shows the percentage amount of interest- value in each. A com- 

 1878. q 



