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 may have cost in building, a tax of three or four shillings in the pound, joined with other taxes, would ruin almost all the rich and great families of this, and, I believe, of every other civilised 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 net rent of their estates.It is the accumulated expense of several successive generations, laid out upon objects of great beauty and magnificance, indeed; but, in proportion to what they cost, of very small exchangeable value.
Ground-rents are a still more proper subject of taxation than the rent of houses.A tax upon ground-rents would not raise the rents 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 industry.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.