Gross income

“ When an artist who earns $10,000 per annum appears in a country, the gross national income increases in a way similar to that in which it increases when a new commodity is found which would have a yearly increase of value equal to $10,000 over and above that of the raw material. ”

“ An entire people should value only gross product. (I, 183.) In his Etudes, Essai, II: Du Revenu Social, Sismondi distinguishes as elements of the gross national income: a, pure capital, the return of outlay; b, that which is at once both capital and income, and serves as family support (capital as a necessarily remaining supply, income as the product of the preceding year) ; c, net income, the excess of production over consumption. ”

“ If the industrial, commercial and leisure classes of the population are collectively considered, total income and aggregate prices are subject to similar concurrent changes. It is a truism, often overlooked, that the sum of prices paid constitutes the total of wages, interest, rents and profits which compose the money-income of society and, per se, the direct means of acquiring the necessities and comforts of life. The measuring and estimating of changes in the cost of living, therefore, is resolved into a comparative study of incomes and expenditures. ”

“ This least productive employment of capital must [Pg 107] determine the rate of interest customary in a country precisely as cost of production on the most unfavorable land determines the price of corn (§§ 110, 150) , and as the result of the work of the laborer last employed does the rate of wages. (§ 165.)
What portion of the total national income, after deduction is made of rent, shall go to the capitalists and what portion to the working class, will depend mainly on whether the capitalists compete more greedily for labor or the laboring classes for capital. ”

“ As the net national income, following the three great factors of all economic production, is divided into three great branches, rent, wages and interest on capital, the net income from any private business may be reduced to one or more of these branches. ”

“ A small portion of the American people are in receipt of incomes that necessitate a report to the revenue officers. Among those persons, a small number are in receipt of incomes that might be termed large—incomes of $10,000 or over, for example. Among these persons with large incomes the majority of the income is secured in the form of rent, interest, dividends and profits. The higher the income group, the larger is the percentage of the income that comes from property holdings. ”

“ There ought normally to be a gradual increase in the proportion of the national income accruing to labor, for as production increases by virtue of improvements in methods, the share of capital being limited by competition, there becomes available a greater dividend for the wage earners ”

“ While population increased in the thirty years by 22 per cent., the number of incomes liable to income-tax increased by 161 per cent., and of these, the incomes that have increased in much the largest proportion are precisely those middling or lower middling incomes which I have before shown to have unfortunately declined since 1688. While the number of incomes over £1,000 a year has increased by 165 per cent., the number of incomes between £150 and £400 a year has increased by 256 per cent. ”

“ Variable capital, v, is the annual wages bill. Surplus, s, is annual rent, interest, and net profit, so that v + s represents net national income. (In this introduction surplus is used interchangeably with rent, interest and net profit.) Constant capital, c, represents at the same time the contribution which materials and capital equipment make to annual output, and the cost of maintaining the stock of physical capital in existence at the beginning of the year. ”

“ To test the question as to whether there has been any disproportionate increase of capital, and of the income from it, in yet another way, I have endeavored to make an analysis of the income-tax returns themselves, distinguishing in them what appears to be the income of idle capital from income which is derived not so much from the capital itself as from the labor bestowed in using the capital. ”

“ With full recognition of the roughness of the work in this study, I hold it be sufficient to dispel the idea that something like 65 per cent of the wealth of the United States is owned by less than 2 per cent of the people, and consider that it clears away the seeming paradox between that idea and the established fact that about 70 per cent of the national income, other than agricultural, goes to the wage earners, with only 30 per cent to property and management. ”

“ From this it appears that the increase of what is known as working-class income in the aggregate is greater than that of any other class, being 100 per cent, while the return to capital and the return to what are called the capitalist classes, whether it is from capital proper or, as I maintain, a return only in the nature of wages, has only increased about 100 per cent, although capital itself has increased over 150 per cent. ”

“ It being assumed that capital is the source of wages, it necessarily follows that the gross amount of wages must be limited by the amount of capital devoted to the employment of labor, and hence that the amount individual laborers can receive must be determined by the ratio between their number and the amount of capital existing for their recompense.5 This reasoning is valid, but the conclusion,23 as we have seen, does not correspond with the facts. ”

“ If it be true, as indicated in our Lesson on the Productive Process, that the legitimate activities of Government belong in the Wealth production category as a Labor factor, then the Economically legitimate income of Government, whether through Taxation or otherwise, would seem to belong to the Distributive category of Wages. ”

“ Another striking fact shown by the table is the large proportion of persons receiving incomes of less than $214 a year, the minimum taxable income. It shows the poverty of the mass of the people as well as the concentration of wealth among the few rich. ”

“ A now receives his income, not from the produce of his capital, but from some other source of income belonging to C, probably from the rent of his land, that is, from payments made to him by farmers out of the produce of their capital. The national capital is diminished by ten thousand pounds, and the national income by all which those ten thousand pounds, employed as capital, would have produced. ”

“ Under this class the following income was taxed: income derived from all those trades and occupations which are subject to a license tax; the income of mining and smelting establishments, and the profit made by the tenants of agricultural lands. In the second class, which includes income from services rendered or labor performed in occupations not subject to a license tax, the rate reported is exceptionally high. Under the third class, which embraces interests from loans, from invested capital, savings banks, and life-insurance companies, the rate is reported to be ten per cent. ”

“ The least favorable view which can be taken of them is, that of considering them a capital, yielding, at present, an income of three millions of dollars annually. Assuming the ordinary rate of six per centum interest per annum as the standard, to ascertain the amount of that capital, it would be fifty millions of dollars. But this income has been progressively increasing. ”

“ It has taken a largely increasing share of the national income, which of course has been at the expense of other classes of people. This is true of every industry wherein the index of wages is higher than the general economic index unless there has been an offsetting increase in the efficiency of the labor. ”

“ In this way a first approximation will be made to the income derived from 'living' capital, and greater accuracy may be then attained by considering in more detail certain kinds of income, and also certain comparatively permanent sources of 'wealth' (personal) which do not yield income. ”

“ No Wealth is completely produced until it has been delivered to ultimate consumers. But Distribution has to do with Wealth apportionment.
In apportionment, or Distribution, there are two major categories, Wages and Rent, corresponding respectively to the two Production categories, Labor and Land. A minor Distributive category, corresponding to the minor category in Production called Capital, is distinguished as Interest. This term identifies the earnings of Capital. Inasmuch, however, as Capital is part of Labor-produced Wealth, Interest must be a subdivision of Labor-earned Wages. ”

“ Figure 9 gives gives the same result but then as a net income plot. The horizontal axis gives income, the vertical axis net income. The tax is given by the difference between net income and the 45-degrees line. Subsistence now is a horizontal line at B. The intersection of the B-line and the net income line gives the minimum wage M. You must earn at least M to satisfy the minimum net income requirement B.
Figure 9: Net income plot
The Tax Void Let us now combine the earnings distribution and the tax plot. ”

“ It seems as if we can take the formulas and graphs of the statics case, and compare real incomes regardless of the time. However, in dynamics, ‘minimum income’ is not just ‘income’ but is a mechanism. The concept of M is that it picks out one income as the minimum, but it can pick that income at a different rate of growth depending upon the mechanism. The interaction between indexation, net subsistence, the tax parameters cause a multiplier effect. ”

“ Whatever, of the ultimate product, is not profit, is repayment of wages.
§ 7.⁠It thus appears that the two elements on which, and which alone, the gains of the capitalists depend, are, first, the magnitude of the produce, in other words, the productive power of labour; and secondly, the proportion of that produce obtained by the labourers themselves; the ratio, which the remuneration of the labourers bears to the amount they produce. These two things form the data for determining the gross amount divided as profit among all the capitalists of the country ”

“ The enormous increase in our national income and our national capital is doubted or denied by no one. Now let us express the increase in income as a supposed increase in the average height of the rooms inhabited by the population. ”

“ Moreover, the settled prices prevailing throughout the country allow of assured calculations and precautions as to business ventures, and permit such a ratio to be established between expenses and income, that at the end of the fiscal year a profit, not a loss, may be counted upon. ”

“ X.25 If the income of workingmen is under consideration, we have to deal with index numbers for prices of those goods entering into workingmen's budgets, and with index numbers of the quantities of such goods. The first will show the cost of living of the workingman, or the purchasing power of a workingman's dollar ”

“ Forest.
“You have left out of your calculation the women and children who were not earning anything, but who depended upon the income of their husbands, fathers and brothers”, Mr. Forest explained. “An income of two hundred and four dollars for every man, woman and child would, therefore, represent a large increase, if the figures were fairly given. But they are not correct. In order to make the income of the nation appear greater than it really is, the value of the various productions is quoted higher than in your days. ”

“ Although, as we have seen, of the yearly income of the nation a part only consists of material things, yet the remainder depends upon these, and its amount is necessarily in proportion to them. Accordingly, when we are dealing with the question of how the income is produced, we may represent the whole of it as a great heap of commodities, which every year disappears, and is every year replaced by a new one. Here then we have a heap of commodities on one side, and on the other the subjects of our inquiry—namely, the conditions and forces which produce that heap. ”

“ If the income distribution remains the same (all incomes grow with the same rate) then also the average income, y = W grows at the same rate, and then also the net income distribution remains the same, and then the ratio of net average to subsistence remains the same too. ”

“ As we have already noticed, the £160 line at which assessment to income tax begins, divides the national income into two almost equal parts. Those persons who have more than £160 per annum enjoy an aggregate income of £909,000,000. Those persons who have less than £160 per annum enjoy an aggregate income of £935,000,000. ”

“ The average income per head in this country of that class—composed mainly of wage-earners—which does not pay income tax has, in terms of money, nearly trebled itself during the present century; its purchasing power has increased in a yet larger ratio, and its increase will be found to have been most rapid and striking at periods when the struggle amongst the employing class has been keenest. ”

“ We want to find what it is that determines the division of their joint produce between land, labour and capital; and profits is not a term that refers exclusively to any one of these three divisions. Of the three parts into which profits are divided by political economists, namely compensation for risk, wages of superintendence and return for the use of capital, the third falls under the term interest, which includes all the returns for the use of capital, and excludes everything else ”

“ The payment of wages, therefore, always implies the previous rendering of labor. Now, what does the rendering of labor in production imply? Evidently the production of wealth, which, if it is to be exchanged or used in production, is capital. Therefore, the payment of capital in wages pre-supposes a production of capital by the labor for which the wages are paid. And as the employer generally makes a profit, the payment of wages is, so far as he is concerned, but the return to the laborer of a portion of the capital he has received from the labor. ”