Let us suppose, for example, that a particular person judges that he can afford for house-rent an 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 this 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 anything 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 the 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 necessary 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.