An Inquiry into the Nature and Causes of the Wealth of Nations - Adam Smith (ebooks children's books free .TXT) 📗
- Author: Adam Smith
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taxes, would ruin almost all the rich and great families of this,
and, I believe, of every other civilized country. Whoever will
examine with attention the different town and country houses of
some of the richest and greatest families in this country, will
find that, at the rate of only six and a-half, or seven per cent.
upon the original expense of building, their house-rent is nearly
equal to the whole neat rent of their estates. It is the
accumulated expense of several successive generations, laid out
upon objects of great beauty and magnificence, indeed, but, in
proportion to what they cost, of very small exchangeable value.{
Since the first publication of this book, a tax nearly upon the
abovementioned principles thas been imposed.}
Ground-rents are a still more proper subject of taxation than the
rent of houses. A tax upon ground-rents would not raise the rent
of houses; it would fall altogether upon the owner of the
ground-rent, who acts always as a monopolist, and exacts the
greatest rent which can be got for the use of his ground. More or
less can be got for it, according as the competitors happen to be
richer or poorer, or can afford to gratify their fancy for a
particular spot of ground at a greater or smaller expense.
In every country, the greatest number of rich competitors is in
the capital, and it is there accordingly that the highest
ground-rents are always to be found. As the wealth of those
competitors would in no respect be increased by a tax upon
ground-rents, they would not probably be disposed to pay more for
the use of the ground. Whether the tax was to be advanced by the
inhabitant or by the owner of the ground, would be of little
importance. The more the inhabitant was obliged to pay for the
tax, the less he would incline to pay for the ground ; so that
the final payment of the tax would fall altogether upon the owner
of the ground-rent. The ground-rents of uninhabited houses ought
to pay no tax.
Both ground-rents, and the ordinary rent of land, are a species
of revenue which the owner, in many cases, enjoys without any
care or attention of his own. Though a part of this revenue
should be taken from him in order to defray the expenses of the
state, no discouragement will thereby be given to any sort of
iudustry. The annual produce of the land and labour of the
society, the real wealth and revenue of the great body of the
people, might be the same after such a tax as before.
Ground-rents, and the ordinary rent of land, are therefore,
perhaps, the species of revenue which can best bear to have a
peculiar tax imposed upon them.
Ground-rents seem, in this respect, a more proper subject of
peculiar taxation, than even the ordinary rent of land. The
ordinary rent of land is, in many cases, owing partly, at least,
to the attention and good management of the landlord. A very
heavy tax might discourage, too much, this attention and good
management. Ground-rents, so far as they exceed the ordinary rent
of land, are altogether owing to the good government of the
sovereign, which, by protecting the industry either of the whole
people or of the inhabitants of some particular place, enables
them to pay so much more than its real value for the ground which
they build their houses upon; or to make to its owner so much
more than compensation for the loss which he might sustain by
this use of it. Nothing can be more reasonable, than that a fund,
which owes its existence to the good government of the state,
should be taxed peculiarly, or should contribute something more
than the greater part of other funds, towards the support of that
government.
Though, in many different countries of Europe, taxes have been
imposed upon the rent of houses, I do not know of any in which
ground-rents have been considered as a separate subject of
taxation. The contrivers of taxes have, probably, found some
difficulty in ascertaining what part of the rent ought to be
considered as ground-rent, and what part ought to be considered
as building-rent. It should not, however, seem very difficult to
distinguish those two parts of the rent from one another.
In Great Britain the rent of houses is supposed to be taxed in
the same proportion as the rent of land, by what is called the
annual land tax. The valuation, according to which each different
parish and district is assessed to this tax, is always the same.
It was originally extremely unequal, and it still continues to be
so. Through the greater part of the kingdom this tax falls still
more lightly upon the rent of houses than upon that of land.
In some few districts only, which were originally rated high, and
in which the rents of houses have fallen considerably, the land
tax of three or four shillings in the pound is said to amount to
an equal proportion of the real rent of houses. Untenanted
houses, though by law subject to the tax, are, in most districts,
exempted from it by the favour of the assessors; and this
exemption sometimes occasions some little variation in the rate
of particular houses, though that of the district is always the
same. Improvements of rent, by new buildings, repairs, etc. go to
the discharge of the district, which occasions still further
variations in the rate of particular houses.
In the province of Holland,{ Memoires concernant les Droits, etc.
p. 223.} every house is taxed at two and a-half per cent. of its
value, without any regard, either to the rent which it actually
pays, or to the circumstance of its being tenanted or untenanted.
There seems to be a hardship in obliging the proprietor to pay a
tax for an untenanted house, from which he can derive no revenue,
especially so very heavy a tax. In Holland, where the market rate
of interest does not exceed three per cent., two and a-half per
cent. upon the whole value of the house must, in most cases,
amount to more than a third of the building-rent, perhaps of the
whole rent. The valuation, indeed, according to which the houses
are rated, though very unequal, is said to be always below the
real value. When a house is rebuilt, improved, or enlarged, there
is a new valuation, and the tax is rated accordingly.
The contrivers of the several taxes which in England have, at
different times, been imposed upon houses, seem to have imagined
that there was some great difficulty in ascertaining, with
tolerable exactness, what was the real rent of every house. They
have regulated their taxes, therefore, according to some more
obvious circumstance, such as they had probably imagined would,
in most cases, bear some proportion to the rent.
The first tax of this kind was hearth-money; or a tax of two
shillings upon every hearth. In order to ascertain how many
hearths were in the house, it was necessary that the tax-gatherer
should enter every room in it. This odious visit rendered the tax
odious. Soon after the Revolution, therefore, it was abolished as
a badge of slavery.
The next tax of this kind was a tax of two shillings upon every
dwelling-house inhabited. A house with ten windows to pay four
shillings more. A house with twenty windows and upwards to pay
eight shillings. This tax was afterwards so far altered, that
houses with twenty windows, and with less than thirty, were
ordered to pay ten shillings, and those with thirty windows and
upwards to pay twenty shillings. The number of windows can, in
most cases, be counted from the outside, and, in all cases,
without entering every room in the house. The visit of the
tax-gatherer, therefore, was less offensive in this tax than in
the hearth-money.
This tax was afterwards repealed, and in the room of it was
established the window-tax, which has undergone two several
alterations and augmentations. The window tax, as it stands at
present (January 1775), over and above the duty of three
shillings upon every house in England, and of one shilling upon
every house in Scotland, lays a duty upon every window, which in
England augments gradually from twopence, the lowest rate upon
houses with not more than seven windows, to two shillings, the
highest rate upon houses with twentyfive windows and upwards.
The principal objection to all such taxes is their inequality; an
inequality of the worst kind, as they must frequently fall much
heavier upon the poor than upon the rich. A house of ten pounds
rent in a country town, may sometimes have more windows than a
house of five hundred pounds rent in London ; and though the
inhabitant of the former is likely to be a much poorer man than
that of the latter, yet, so far as his contribution is regulated
by the window tax, he must contribute more to the support of the
state. Such taxes are, therefore, directly contrary to the first
of the four maxims above mentioned. They do not seem to offend
much against any of the other three.
The natural tendency of the window tax, and of all other taxes
upon houses, is to lower rents. The more a man pays for the tax,
the less, it is evident, he can afford to pay for the rent. Since
the imposition of the window tax, however, the rents of houses
have, upon the whole, risen more or less, in almost every town
and village of Great Britain, with which I am acquainted.
Such has been, almost everywhere, the increase of the demand for
houses, that it has raised the rents more than the window tax
could sink them ; one of the many proofs of the great prosperity
of the country, and of the increasing revenue of its inhabitants.
Had it not been for the tax, rents would probably have risen
still higher.
ARTICLE II. � Taxes upon Profit, or upon the Revenue arising
from Stock.
The revenue or profit arising from stock naturally divides itself
into two parts; that which pays the interest, and which belongs
to the owner of the stock ; and that surplus part which is over
and above what is necessary for paying the interest.
This latter part of profit is evidently a subject not taxable
directly. It is the compensation, and, in most cases, it is no
more than a very moderate compensation for the risk and trouble
of employing the stock. The employer must have this compensation,
otherwise he cannot, consistently with his own interest, continue
the employment. If he was taxed directly, therefore, in
proportion to the whole profit, he would be obliged either to
raise the rate of his profit, or to charge the tax upon the
interest of money ; that is, to pay less interest. If he raised
the rate of his profit in proportion to the tax, the whole tax,
though it might be advanced by him, would be finally paid by one
or other of two different sets of people, according to the
different ways in which he might employ the stock of which he had
the management. If he employed it as a farming stock, in the
cultivation of land, he could raise the rate of his profit only
by retaining a greater portion, or, what comes to the same thing,
the price of a greater portion, of the produce of the land; and
as this could be done only by a reduction of rent, the final
payment of the tax would fall upon the landlord. If he employed
it as a mercantile or manufacturing stock, he could raise the
rate of his
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