27
stantially (though, as used by Leven, not quite) what I call “in-
come” and, since savings may be said to enter income before leav-
ing it I have comparatively little objection to the compromise
by which these two items are recorded as separate varieties of
income. If they must both be called income, they might better
be called enjoyed income and reinvested income. But they are
so widely different in nature that to call them both income is
likely to obscure their difference and especially the fundamental
fact that only the former is capitalized to form capital value, the
latter being itself the capitalized value of a part of the stream
of enjoyed income. The fact that some investors and speculators
are constantly watching their capital gains, as noted by Mr.
Leven, does not imply that they think of them as income. If
and when they do, the chances are they are accustomed speedily
to convert it into true income. As we have seen, capital gain
when spent can be converted into income just as income when
saved can be turned back into capital. If we need any term to
cover both these mutually exclusive things why not call them
simply “gain” one kind being capital-gain and the other, income-
gain?
CONCLUSION
Possibly the grave injustices now perpetuated by taxing “in-
come,” which is radically different from ordinary income, might
soon disappear if economists and statisticians were agreed and
insistent that such “income” is not income at all. If the usage
among scientific students were perfectly clear, the Supreme Court
might ultimately declare taxation of such capital gain unconsti-
tutional. It alone has the power to decide what income legally
is. It has been reluctant to do so, and will probably not do so
if it can be avoided. But once it is put in possession of a work-
able system in which it has full confidence, based upon an
economically and legally sound concept, there is reason to hope
that it may make such sound economics a means of serving the
ends of justice.
It must be remembered, however, that the main desideratum
is to use correct concepts in our thinking, statistics, tax legislation,
tax administrations and judicial decisions, not simply to insist on
the use of a certain terminology. If any one wishes to insist on
calling savings “income” this is of comparatively little conse-
quence, (except as thereby confusions are likely to enter). Many
who are still unwilling to adept my own preferred terminology
admit the essential point that savings ought not to be taxed like
“other income.” They realize that savings are not discounted in