400 NATURE OF CAPITAL AND INCOME

including the ¢repercussion” of the tax on the capital-values
themselves.
The taxes in the table evidently differ somewhat from the
taxes given in the text, which do not include the effect of
«repercussion.” The present value, therefore, of this tax on
the increase of capital should be altered from $714 to $661.81.
A similar correction should be made for the case of the spendthrift.
 Our main object, however, is not to study the effects
of different methods of levying taxes, but merely to show how
untenable is the theory which includes savings under income,
and excludes that part of true income or services which brings
about a depreciation of capital.

§ 3 (ro Cm. XIV, § 13)
Unrestricted Application of a True Income Tax Impracticable

Theoretically, an income tax should tax every element of
income, large or small, positive or negative. That is, all positive
 items should have a tax and all negative items a bounty.
This system would be ideal in theory but difficult to carry out
in practice.
No attempt is made in this book to contrive a practical
system of taxation which would avoid all the difficulties which
have been pointed out as belonging to systems now in use. It
is undoubtedly true that it would be impracticable to assess
taxes on each article on the basis of the actual items of income
 it yields; for most of such items are simply the positive
sides of « interactions” and are offset as outgoes in the accounts
of some other article of capital. To carry out such a system in
detail would require that we levy taxes on the proceeds of every
sale and remit them on every investment. It would be difficult
to avoid injustice, evasion, and fraud if the attempt were made
to assess taxes on such income and remit, as would be required
logically, taxes on the corresponding outgo. The taxpayer would
contrive to exaggerate his outgo and understate his income.
Consequently, the system is not wholly unjust which exempts
 from taxation that part of income which stands
for impairment of capital, and assesses taxes on that part
which swells capital, or savings. The system would be