SEc. 5] INCOME 111 
far as popular usage goes, it gives its sanction to the use of 
the term “income” in the one sense quite as much as in the 
other, though usually with very little intelligent diserimi- 
nation between the two. For instance, a life annuity from 
an insurance company, or a pension from a government, 
is universally recognized as ‘“‘income.” Yet this income 
trenches on the capital which produces it, eating it up year 
by year until, at the end of its allotted period, it is entirely 
exhausted. Let us suppose that the annuity is one of $1000 
a year for twenty years. Reckoning interest at five per cent, 
such an annuity is worth, by the actuaries’ tables, $12,462. 
That is, the annuitant could sell his annuity, on a five 
per cent basis, for $12,462 in ready money. But this 
$12,462 invested at five per cent would bring in, with- 
out impairing the principal, not $1000 a year, but 
only $623.10. If then he actually gets $1000 he is 
trenching on his capital the first year to the extent of 
$376.90. Yet we regard him, and very properly too, as 
having a true income of $1000 a year. 
If it were true that income could never trench on capital, 
we could not reckon a laboring man’s wages as income 
without first deducting a premium or sinking fund sufficient 
to provide for the continuance of this income after the de- 
struction by death of the laborer. If the annuitant or 
laborer should actually set aside such an annual sum as to 
maintain the capital value of his property unimpaired, we 
should be quite justified in considering the net sum, and 
not the gross sum, as income. The $1000 annuitant who 
pays $376.90 annually into a sinking fund is getting 
only $623.10 annually, not $1000, for an income, and the 
laboring man who pays an insurance premium reduces his 
income by that amount. It surely makes a difference 
whether these “sinking funds” or “premiums” are actually 
set aside or merely reckoned. To reckon what one ought 
to save in order to maintain capital is not to save 1t, 
and a definition of income which depends upon an ideal