one accord pronounce it to be a "dismal failure." The chief reason assigned for this failure has been that the assessment of the tax is imperfect and incomplete because of the in competency or dishonesty of officials. The usual thought is that if all property could be justly assessed the plan would be excellent. Undoubtedly the difficulty of just assessment has its part in the weakness of the tax ; but back of and more important that this is an inherent fallacy in the apparently simple principle of the tax.
§ 3. Ambiguity of the term "property." Unfortunately, the word property is applied, even by the most competent courts, both to the intangible right of ownership (the funda mental meaning) and to the concrete thing that is owned, the source of the income.' But apparently the value of the right to the income yielded by a house, for example, is merely the value of the house. The value of the property in the 0114 sense (the abstract ownership, the intangible right) is merely a reflection of the value of the property in the other sense (the concrete wealth). There are not here two independent bodies of economic wealth. Whatever value belongs to the one is subtracted from the other. Nor is it rational to take the paper document called a deed (which is but the evidence of ownership) and call it tangible property having a value in addition to the house itself. Yet, in fact, all these confusions are constantly made in taxation. The term "intangible per sonal property" is applied to such things as mercantile credits, promissory notes, bonds—in general to ?e right to collect sums from another person, whether these rights arise out of sales or of loans—and all are treated as parts of taxable property. Sometimes the evidences of indebtedness, the promissory notes or the mortgage papers, are even called tangible property, the same term that is applied to land, houses, and machinery. By universal practice supported by a long line of court decisions, these rights (whether evidenced by paper or not) are made subject to taxation, except as by 8 See Vol. I, pp. 264-267, piecemeal legislation certain grudging exceptions have been made. These views and this practice are supported by the popular desire to tax money-lenders. The result is "double
taxation" of many sources of income. This involves a burden that is ruinous in some cases, both to borrowers and to lenders, and that tempts in all cases to the evasion of the tax.
Take, for example, a house assessed at $10,000 which is owned free of debt and which has a rental value of $600. If the rate of taxation is 1.5 per cent, the tax paid would be $150. Now if the owner borrows $8000 he is still taxable $150 on the full value of the house, and the lender nearly everywhere is taxable on the amount of his mortgage, which would be $120 additional. The total tax payable out of the one source of income, the house, is then $270. The same analysis will show that any credit is but a contractual claim upon some other source of income which is, or should have been, already taxed.
If one person owns all the capital-value invested in a specific piece of wealth, no attempt is made to tax both the capital and the wealth; but if it happens that two or more persons share the capital-value invested in the same wealth, the attempt is made to tax as a unit the full value of the wealth and, in addition, some part of the capital also. It is, however, easy in most cases to conceal this "intangible prop erty" from the assessor's eyes, and a comparatively small amount of it is ever taxed. This means inequality and hard ship in the operation of the tax and, as a result, unceasing temptation to perjury by the taxpayer and to favoritism and graft by public officials.