In general, however, progressive taxation is not practicable on the basis of the kind of income. It is susceptible of application, on a wide scale, only with reference to the amount of income. To many persons this will seem no significant distinction. To tax an income large in amount will seem to them the same thing as taxing an income objectionable in kind. Tho few would carry this sort of belief to its logical outcome and condemn all inequality once for all, there is an abiding feeling that great inequalities are bad and very large incomes peculiarly fit objects of taxation. The growth of social sympathy and all the prepossessions of democracy strengthen the hold of the principle of progression in its undiscriminating form. This state of mind and the inevitable formulation of the law on sharp lines make it well-nigh certain that progressive taxation will have wider and wider application. The only question will be how far it shall go and what difficulties of administration it must encounter.
Still another question arises with regard to differential or progressive taxes on property incomes. It is concerned with the application of progression not according to the source or kind of the property income but purely according to its amount.
The essential ground on which interest can be defended is that the return is necessary in order to induce accumulation. Saving is onerous and will not be carried on unless there is a return on investments. But we have seen that this is by no means the exact situation with regard to all savings. There are many intramarginal savers. As to these, the appropriation of part of their income by the state would not lessen accumulation. The same principle is applicable as in the case of rent proper. A tax on rent falls definitively on the owner and has no further effects on the supply or the utilization of the source of rent. From this point of view there may be ground for progressive taxation of large property incomes.
Those whose means are large almost always enjoy some "saver's rent." They may secure say 4 per cent on their investments; but they would maintain the investments intact in almost all cases even tho they got only 2 per cent. The capital sum being large, a comfortable in
come, perhaps a large income, would still be secured at the lower rate. Rather than forego this income, accumulation would be maintained and capital would remain undiminished.
The same reasoning would apply, of course, in all cases where there is saver's rent. Those who save primarily in order to make provision for the uncertainties of the future, for old age, for wife and children, would continue to do so in large measure, even tho interest rates were much reduced, nay wiped out. The appropriation thru taxation of a part of their income from accumulations would not cause a decline in social capital. But in these cases there is not commonly the degree of inequality which gives rise to the demand for differential or progressive taxation. Great inequalities, such as seem inconsistent with the democratic and equalizing spirit of our time, arise from the very large properties, which are hardly ever accumulated merely because of a desire to provide for the future. Social ambition, the love of domination, the pride of achievement, are the motives of the creators of fortunes; social ambition, again, and the love of ease are the motives which lead their descendants to maintain the fortunes. A lower rate of return would not cause impairment of their principal or a diminution of the sources on which the community's apparatus of production depends.
On grounds like these progressive taxation of large property incomes can be advocated; advocated, that is, if one frankly accepts the view that great inequalities in wealth are undesirable and should be lessened, by taxation or other means, so far as other consequences equally undesirable for the community can be avoided. In this case one possible undesirable consequence is a check to accumulation; but on the strict theory of saver's rent no check in fact is to be expected.