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of cultivation. The

produce of a tax levied in the latter way will vary, not only

according to the variations in the produce of the land, but

according both to those in the value of the precious metals, and

those in the quantity of those metals which is at different times

contained in coin of the same denomination. The produce of the

former will always bear the same proportion to the value of the

real produce of the land. The produce of the latter may, at

different times, bear very different proportions to that value.

 

When, instead either of a certain portion of the produce of land,

or of the price of a certain portion, a certain sum of money is

to be paid in full compensation for all tax or tythe; the tax

becomes, in this case, exactly of the same nature with the land

tax of England. It neither rises nor falls with the rent of the

land. It neither encourages nor discourages improvement. The

tythe in the greater part of those parishes which pay what is

called a modus, in lieu of all other tythe is a tax of this kind.

During the Mahometan government of Bengal, instead of the payment

in kind of the fifth part of the produce, a modus, and, it is

said, a very moderate one, was established in the greater part of

the districts or zemindaries of the country. Some of the servants

of the East India company, under pretence of restoring the public

revenue to its proper value, have, in some provinces, exchanged

this modus for a payment in kind. Under their management,

this change is likely both to discourage cultivation, and to give

new opportunities for abuse in the collection of the public

revenue, which has fallen very much below what it was said to

have been when it first fell under the management of the company.

The servants of the company may, perhaps, have profited by the

change, but at the expense, it is probable, both of their masters

and of the country.

 

Taxes upon the Rent of Houses.

 

The rent of a house may be distinguished into two parts, of which

the one may very properly be called the building-rent; the other

is commonly called the ground-rent.

 

The building-rent is the interest or profit of the capital

expended in building the house. In order to put the trade of a

builder upon a level with other trades, it is necessary that this

rent should be sufficient, first, to pay him the same interest

which he would have got for his capital, if he had lent it upon

good security ; and, secondly, to keep the house in constant

repair, or, what comes to the same thing, to replace, within a

certain term of years, the capital which had been employed in

building it. The building-rent, or the ordinary profit of

building, is, therefore, everywhere regulated by the ordinary

interest of money. Where the market rate of interest is four per

cent. the rent of a house, which, over and above paying the

ground-rent, affords six or six and a-half per cent. upon the

whole expense of building, may, perhaps, afford a sufficient

profit to the builder. Where the market rate of interest is five

per cent. it may perhaps require seven or seven and a half per

cent. If, in proportion to the interest of money, the trade of

the builders affords at any time much greater profit than this,

it will soon draw so much capital from other trades as will

reduce the profit to its proper level. If it affords at any time

much less than this, other trades will soon draw so much capital

from it as will again raise that profit.

 

Whatever part of the whole rent of a house is over and above what

is sufficient for affording this reasonable profit, naturally

goes to the ground-rent; and, where the owner of the ground and

the owner of the building are two different persons, is, in most

cases, completely paid to the former. This surplus rent is the

price which the inhabitant of the house pays for some real or

supposed advantage of the situation. In country houses, at a

distance from any great town, where there is plenty of ground to

chuse upon, the ground-rent is scarce anything, or no more than

what the ground which the house stands upon would pay, if

employed in agriculture. In country villas, in the neighbourhood

of some great town, it is sometimes a good deal higher; and the

peculiar conveniency or beauty of situation is there frequently

very well paid for. Ground-rents are generally highest in the

capital, and in those particular parts of it where there happens

to be the greatest demand for houses, whatever be the reason of

that demand, whether for trade and business, for pleasure and

society, or for mere vanity and fashion.

 

A tax upon house-rent, payable by the tenant, and proportioned to

the whole rent of each house, could not, for any considerable

time at least, affect the building-rent. If the builder did not

get his reasonable profit, he would be obliged to quit the trade;

which, by raising the demand for building, would, in a short

time, bring back his profit to its proper level with that of

other trades. Neither would such a tax fall altogether upon the

ground-rent; but it would divide itself in such a manner, as to

fall partly upon the inhabitant of the house. and partly upon the

owner of the ground.

 

Let us suppose, for example, that a particular person judges that

he can afford for house-rent all expense of sixty pounds a-year;

and let us suppose, too, that a tax of four shillings in the

pound, or of one-fifth, payable by the inhabitant, is laid upon

house-rent. A house of sixty pounds rent will, in that case, cost

him seventy-two pounds a-year, which is twelve pounds more than

he thinks he can afford. He will, therefore, content himself with

a worse house, or a house of fifty pounds rent, which, with the

additional ten pounds that he must pay for the tax, will make up

the sum of sixty pounds a-year, the expense which he judges he

can afford, and, in order to pay the tax, he will give up a part

of the additional conveniency which he might have had from a

house of ten pounds a-year more rent. He will give up, I say, a

part of this additional conveniency; for he will seldom be

obliged to give up the whole, but will, in consequence of the

tax, get a better house for fifty pounds a-year, than he could

have got if there had been no tax for as a tax of this kind, by

taking away this particular competitor, must diminish the

competition for houses of sixty pounds rent, so it must likewise

diminish it for those of fifty pounds rent, and in the same

manner for those of all other rents, except the lowest rent, for

which it would for some time increase the competition. But

the rents of every class of houses for which the competition was

diminished, would necessarily be more or less reduced. As no part

of this reduction, however, could for any considerable time at

least, affect the building-rent, the whole of it must, in the

long-run, necessarily fall upon the ground-rent. The final

payment of this tax, therefore, would fall partly upon the

inhabitant of the house, who, in order to pay his share, would be

obliged to give up a part of his conveniency ; and partly upon

the owner of the ground, who, in order to pay his share, would be

obliged to give up a part of his revenue. In what proportion this

final payment would be divided between them, it is not, perhaps,

very easy to ascertain. The division would probably be very

different in different circumstances, and a tax of this kind

might, according to those different circumstances, affect very

unequally, both the inhabitant of the house and the owner of the

ground.

 

The inequality with which a tax of this kind might fall upon the

owners of different ground-rents, would arise altogether from the

accidental inequality of this division. But the inequality

with which it might fall upon the inhabitants of different

houses, would arise, not only from this, but from another cause.

The proportion of the expense of house-rent to the whole expense

of living, is different in the different degrees of fortune. It

is, perhaps, highest in the highest degree, and it diminishes

gradually through the inferior degrees, so as in general to be

lowest in the lowest degree. The necessaries of life occasion the

great expense of the poor. They find it difficult to get food,

and the greater part of their little revenue is spent in getting

it. The luxuries and vanities of life occasion the principal

expense of the rich ; and a magnificent house embellishes and

sets off to the best advantage all the other luxuries and

vanities which they possess. A tax upon house-rents, therefore,

would in general fall heaviest upon the rich ; and in this sort

of inequality there would not, perhaps, be any thing very

unreasonable It is not very unreasonable that the rich should

contribute to the public expense, not only in proportion to their

revenue, but something more than in that proportion.

 

The rent of houses, though it in some respects resembles the rent

of land, is in one respect essentially different from it. The

rent of land is paid for the use of a productive subject. The

land which pays it produces it. The rent of houses is paid for

the use of an unproductive subject. Neither the house, nor the

ground which it stands upon, produce anything. The person who

pays the rent, therefore, must draw it from some other source of

revenue, distinct from and independent of this subject. A tax

upon the rent of houses, so far as it falls upon the inhabitants,

must be drawn from the same source as the rent itself, and must

be paid from their revenue, whether derived from the wages of

labour, the profits of stock, or the rent of land. So far as it

falls upon the inhabitants, it is one of those taxes which fall,

not upon one only, but indifferently upon all the three different

sources of revenue ; and is, in every respect, of the same nature

as a tax upon any other sort of consumable commodities. In

general, there is not perhaps, any one article of expense or

consumption by which the liberality or narrowness of a man’s

whole expense can be better judged of than by his house-rent. A

proportional tax upon this particular article of expense might,

perhaps, produce a more considerable revenue than any which has

hitherto been drawn from it in any part of Europe. If the tax,

indeed, was very high, the greater part of people would endeavour

to evade it as much as they could, by contenting themselves with

smaller houses, and by turning the greater part of their expense

into some other channel.

 

The rent of houses might easily be ascertained with sufficient

accuracy, by a policy of the same kind with that which would be

necesary for ascertaining the ordinary rent of land. Houses not

inhabited ought to pay no tax. A tax upon them would fall

altogether upon the proprietor, who would thus be taxed for a

subject which afforded him neither conveniency nor revenue.

Houses inhabited by the proprietor ought to be rated, not

according to the expense which they might have cost in building,

but according to the rent which an equitable arbitration might

judge them likely to bring if leased to a tenant. If rated

according to the expense which they might have cost in building,

a tax

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