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 any thing, 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 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 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