The Simplified Wealth of Nations of Adam Smith, Book 5, Chap. 2, Part 2, Article 1: Taxation of House and Ground Rents


Chapter 2f, Part 2: Article 1: Taxes on House and Ground Rent



66 House rents have two parts: 67 The building-rent is the interest or profit on the capital spent in building the house. 68 The house-rent in excess of the building-rent naturally goes to the ground-rent.

House Rent = Building Rent + Ground Rent

69 A tax on house-rent, payable by the tenant, could not affect the building-rent. 70 For example, if a person rents a house for £60 a year. 71 The inequality of this tax on the owners of ground-rents would come from the accidental inequality of this division between tenant and ground owner. 72 The house rents resemble land rents, but is essentially different in one respect. 73 House rents might easily be ascertained accurately in the same way ordinary land rents are ascertained. 74 Ground-rents are a better tax subject than house-rents. 75 Both ground-rents and ordinary land rents are a revenue which the owner enjoys without any care of his own. 76 Ground-rents are a more proper subject of taxation than ordinary land rents. 77 I do not know of any taxes on house-rents in which ground-rents were a separate subject of taxation. 78 In Great Britain, house-rent is taxed in the same proportion as land rent by the annual land-tax. 79 In Holland, every house is taxed at 2.5% of its value without regard to: It seems difficult to oblige the proprietor to pay a tax for an untenanted house from which he can derive no revenue. 80 The contrivers of house taxes in England thought that it was very difficult to determine the real rent of every house.

English House Taxes
81 The first tax of this kind was hearth-money. 82 The next tax was a tax of 24 pence on every inhabited dwelling-house. 83 This tax was afterwards repealed and replaced with the window-tax. 84 Such taxes are the worst and most unequal. 85 The window-tax and all house taxes naturally reduce rents.

Next: Chapter 2g: Profit Taxes