This comprehensive and automatically secured transparency of the whole of the productive and business relations afforded to the tax assessed in Freeland a perfectly reliable basis. The principle was that the public expenditure of the community should be covered by a contribution from each individual exactly in proportion to his net income; and as in Freeland there was no source of income except labour, and the income from this was exactly known, there was not the slightest difficulty in apportioning the tax. The apportionment of the tax was very simply made as soon as the income existed, and that through the medium of the bank; and this was done not merely in the case of the associations, but also of the few isolated producers. In fact, by means of its bank the community had everyone's income in hand sooner than the earners themselves; and it was merely necessary to debit the earners with the amount and the tax was paid. Hence in Freeland the tax was regarded not as a deduction from net income, but as an outlay deducted from the gross product, just like the trade expenses. In spite of its high amount, no one looked upon it as a burden, because everyone knew that the greater part of it would flow back to him or to his, and every farthing of it would be devoted to purposes of exclusively public utility, which would immediately benefit him. It was therefore quite correct to recognise no difference whatever between productive outlay by the commonwealth and the more private outlay of the associations and individuals, and accordingly to designate the former not as 'taxes,' but as 'general expenditure.'
This general expenditure, however, was very high. In the first year it amounted to thirty-five per cent. of the net profits, and it never sunk below thirty per cent., though the income on which the tax was levied increased enormously. For the tax which the community in Freeland had imposed upon themselves for the very purpose of making this increase of wealth possible was so comprehensive in its objects as to make a most colossal amount necessary.
One of its objects was to create the capital required for the purposes of production. But it was only at first that the whole of this had to be met out of the current tax, as afterwards the repayment of the loans partly met the new demands.