Ground-rents vary

is paid to the ground-owner. according to the situation; they are highest in the capital, and where the demand for houses happens to be the greatest, whilst in the country they are often no more than the same land would yield if employed in agriculture, pp. 432-33.

A tax upon house-rent, payable by the tenant, and proportioned to the whole rent of each house, could not long affect the building-rent: it would divide itself partly upon the inhabitant of the house, and partly upon the owner of the ground, in what proportion it is not very easy to ascertain; whilst as between the inhabitants of houses, the richer would probably pay more in proportion than the poorer, pp. 433-35.

1

The rent of houses is in one respect essentially different from the rent of land. The latter is paid for the use of a productive subject, the former for the use of an unproductive subject. The rent must therefore be drawn from some other source of revenue. 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 is one of those taxes which must fall indifferently upon all the three sources of revenue, and is in every respect of the same nature as a tax upon consumable commodities. In general, there is no article of expense by which a man's whole expense can be better judged of than by his house-rent.2 A proportional tax upon this article would probably be very productive. The rent of houses might be easily ascertained. Uninhabited houses ought to pay no tax. Houses inhabited by the proprietors ought to be rated

This opinion is consistent with our author's theory of productive and unproductive expenditure, with which it must stand or fall.

2 It may be doubted whether this is true, unless the choice of locality is purely voluntary. The artisan, for instance, has no choice between town and country, so far as the more delicate occupations are concerned.

according to the rent they would be likely to bring if leased to a tenant,' pp. 435, 436.

Ground-rents are a still more proper subject of taxation than the rent of houses. A tax on ground-rent would not raise the rent of houses. It would fall upon the owner of the ground-rent, who always acts as a monopolist. Ground-rents and the ordinary rent of land are a species of revenue which can best bear a tax. It being a revenue enjoyed without any attention of the owner, a tax upon it would occasion no discouragement to industry. Ground-rents seem, in this respect, a more proper subject of peculiar taxation than even the ordinary rent of land. There might be some difficulty in ascertaining the proportion of the ground-rent to the building-rent, though the difficulty does not seem very great, pp. 436-38.

In Holland every house, tenanted or untenanted, is taxed at 2 per cent. of its value-a great hardship on the owners of the latter. The contrivers of the taxes imposed upon houses in England, at different times seem to have imagined that there was some great difficulty in ascertaining the real rent of every house: hence the tax of two shillings upon every hearth. This was abolished soon after the revolution. The next tax of this kind was upon every dwelling-house inhabited according to the number of windows it contained. This tax was repealed, and in its stead was established the window-tax. The principal objection to all such taxes is their inequality, as they must frequently fall much heavier upon the poor than upon the rich.3 A

1 This principle is generally cerried out at the present day, to the great scandal of those who think that palaces like Belvoir and Chatsworth ought to be rated rather in proportion to their cost than to their letting value. Probably Adam Smith is more in the right than are his critics.

2 F. 621 seq. But it must be remembered that rents adjust themselves to the altered conditions comparatively slowly.

3 Few taxes can be worse than those the avoidance of which con

house of 10. rent in the country may have more windows than a house of 500l. rent in London. Such taxes are, therefore, contrary to the first of the four maxims above-mentioned, pp. 438-40.

ARTICLE II. Taxes upon the Profit, or upon the Revenue arising from Stock.

The

The revenue arising from stock divides itself into two parts: (1) that which pays the interest; and (2) that which is over and above what is necessary for paying the interest. The latter part of profit is a subject not taxable directly. It is a compensation for the risk and trouble of employing the stock. employer must have this compensation, otherwise he cannot continue the employment. If he was taxed directly in proportion to the whole profit, he must either raise the rate of profit, or pay less interest. the former case, the tax would be finally paid by the landlord, or by the consumer according to the way in which he employed his stock. In the latter case, the tax would fall upon the interest of money,' pp. 440, 441.

In

The interest of money seems, at first sight, a subject as fit to be taxed directly as the rent of land. Two circumstances, however, render it less proper. (1) The quantity and value of the land which any man possesses can never be secret, but the whole amount of his capital cannot be exactly ascertained. It is liable, besides, to continual variations. (2) Land is a subject

strains the object of them to injure his bodily condition, as by closing windows or blocking up chimneys (see Rogers's note).

It is asserted by Mr. Mill that a general tax on profits cannot be shifted, though a particular tax (e.g. on brewers) will be (Mill. v. 3. 3.). But (as Rogers points out) Mill assumes that the rate of profit depends entirely on competition (in the field'). If the competition be for customers (for the field') the tax may ruin the weaker dealers and increase the profit of those who remain.

which cannot be removed, whereas stock easily may. A tax, therefore, which tended to drive away stock from any country would tend to dry up every source of revenue. The profits of stock, the rent of land, and the wages of labour would be diminished by the removal. Hence the loose manner in which stock is estimated by those nations who have attempted to tax the revenue arising from it. If the lands of England are not rated to the land-tax at half their value, the stock of England (assessed upon houses) is scarce rated at the fiftieth part of its actual value, pp. 441–44.

In all countries a severe inquisition into the circumstances of private persons has been carefully avoided. At Hamburg every inhabitant pays to the state one fourth per cent. of all he possesses: this is a tax upon stock. Every man assesses himself upon oath before a magistrate. This tax is paid with great fidelity. Nor is it peculiar to Hamburg. Similar instances are to be found in Switzerland, at Underwald, Zurich, and Basle. And once a tax of the fiftieth penny was imposed upon every citizen in Holland, assessed in the same manner as at Hamburg, pp. 444-46.

Taxes upon the Profit of Particular Employments.

In some countries taxes are imposed on the profits of stock, sometimes when employed in particular branches of trade, and sometimes when employed in agriculture. Of the former kind are, in England, the tax upon hawkers and pedlars, that upon hackney coaches, &c. A tax upon the profits of stock must always finally fall upon the consumers, and if it is proportioned to the trade of the dealer occasions no oppression to him; although if it be the same on all dealers it tends to favour the great and to oppress the small, pp. 446-47.

What in France is called the personal taille is, per

haps, the most important tax upon the profits of stock employed in agriculture that is levied in any part of Europe. During the feudal government in Europe the sovereign was obliged to content himself with taxing those who were too weak to refuse to pay taxes. The great lords constantly refused to subject themselves to any constant tax.1 But they were willing that the sovereign should tax the other occupiers of land, held by ignoble tenure. Sometimes the tax was laid upon the supposed profits of those who held in farm or lease lands belonging to other people; and in this case the taille was said to be personal. It was the occasion of much oppression and injustice, for since the profits could only be guessed at, it was necessarily both arbitrary and unequal,2 pp. 447-50.

When a tax is imposed upon the profits of stock in a particular branch of trade, the traders are careful that the tax should fall upon the consumer. But when a tax is imposed upon the profits of stock employed in agriculture, it must fall finally upon the landlord. In countries where the personal taille takes place, the farmer is commonly assessed in proportion to the stock which he appears to employ in cultivation. He therefore wishes to appear scarce able to pay anything, for fear of being obliged to pay too much. Hence the cultivation is degraded owing to the wretched stock and implements employed, by which the public, the farmer, and the landlord all suffer, pp. 450, 451.

What are called poll-taxes in America-annual taxes of so much a head upon every negro-are properly taxes upon the profits of a species of stock employed in agri

This dictum refers to direct taxes, for the great lords must have paid indirect taxes (such as import duties) like the rest. But perhaps they were too ignorant to perceive this.

2 The taille was abolished at the Revolution. For an account of the present French land-tax, or contribution foncière, see M'Culloch's edition of Wealth of Nations, pp. 567, 616.