228 report— 1878. 



dealer in incomes, just as you might be a dealer in sugars or teas, or in 

 any other commodity, taxable antecedently to your purchase, and you buy 

 them subject to all their burdens. Your receipts are in this case them- 

 selves incomes, themselves the difference between expenditure and pro- 

 duct, and the tax on them, though charged to the full amount, is a charge 

 on the money that buys them only in the same manner that the tithe is a 

 charge on the purchase money of lands." 



The fallacy of refusing a deduction to the products of perishable 

 sources, and the fallacy of claiming a deduction for the terminable tenure 

 of permanent products, are the obverse forms of a financial illusion. Both 

 fallacies arise from the phenomena of transfer. In the former, true 

 capital by transfer appears as income, and is taxed as income ; in the 

 latter, true income by transfer appears as capital, and as capital would 

 be exempted. It is this double illusion, ever manifesting itself in investi- 

 gations on the Income Tax, that has probably confused the vision of 

 economists and statesmen, and hitherto rendered abortive all attempts at 

 reform. Whether direct taxation be incident on property or on its pro- 

 ducts — on capital or on income — for a series of years matters little ; but 

 it is monstrous that a tax which professes to be either a Property or an 

 Income Tax, should treat capital as if it were income, or income as if it 

 were capital. 



XIV. It sometimes appears to be thought that after all there is little 

 practical difference whether taxation be levied on gross income or on net, 

 on the higher or lower level as it is called. " A certain sum has to be 

 raised, and what matters it whether it be raised as a smaller percentage 

 of a larger sum or as a larger percentage of a smaller one." Doubtless 

 if gross income bore the same relation to net in each case such an argu- 

 ment would be valid, but no such relation exists. The " grossness " of 

 an income stands for the amount of undeducted expenditure the income 

 contains, and gross incomes are of every degree of "grossness." The 

 true net pound — the interest-value pound — is in all cases 20s., but the 

 gross pound is as variable as the nature of sources and the customs of 

 free contract. In land rent the gross pound is legally defined in the 

 Metropolis Valuation Act as 19s., in house rent as varying according to 

 the class of house from 15s. to 17s. Sd., in the rent of mills and manu- 

 factories as 13s. 4>d., in the wages of labour, though -not yet legally 

 defined, it is probably only 10s. All however are pounds gross, and in an 

 assessment proportioned to gross value like that of the existing Income 

 Tax, are equally assessable. By this mode of reckoning, an Income Tax 

 nominally bd. in the pound, is indeed for ordinary principal moneys 

 really bd., but for houses it is in some cases between 6d. and 7d., for 

 mills and manufactoi-ies it is 7\d., and for labour it probably amounts to 

 lOcZ. Gross value is thus not a single measure, but is a loose expression 

 including a number of measures, it may be a multitude of measures, pre- 

 senting a conspicuous absence of uniformity of relation both to true value, 

 and to each other. Perhaps the one positive point of community these 

 measurements by " gross' " value do possess is their inordinate pressure 

 on labour and the products of labour as compared with their pressure on 

 the permanent sources of income. Human labour and the works of 

 human labour have as their distinguishing marks waste and perishability. 

 They essentially constitute the great category of things, quce ipso usu con- 

 sumuntur, but it is " consumability by use " that " gross " value utterly 

 ignores. Between the permanent and the perishable it distinguishes 



