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meantime the temporary supersluity would lower rents, and the consumers would obtain, perhaps, nearly the same accommodation as formerly, for the same aggregate payment, rent and tax together. By degrees, however, as the existing houses wore out, or as increase of population demanded a greater supply, rents would again rise; until it became profitable to recommence building, which would not be until the tax was wholly transferred to the occupier. In the end, therefore, the occupier bears that portion of a tax on rent, which sails on the payment made for the house itself, exclusively of the ground it stands on. The case is partly different with the portion which is a tax on ground-rent. As taxes on rent, properly so called, fall on the landlord, a tax on groundrent, one would suppose, must fall on the ground-landlord, at least after the expiration of the building lease. It will not however fall wholly on the landlord, unless with the tax on groundrent there is combined an equivalent tax on agricultural rent. The lowest rent of land let for building is very little above the rent which the same ground would yield in agriculture: since it is reasonable to suppose that land, unless in case of exceptional circumstances, is let or sold for building as soon as it is decidedly worth more for that purpose than for cultivation. If, therefore, a tax were laid on groundrents without being also laid on agricultural rents, it would, unless of trifling amount, reduce the return from the lowest ground-rents below the ordinary return from land, and would check further building quite as effectually as if it were a tax on building-rents, until either the increased demand of a growing population, or a diminution of supply by the ordinary causes of destruction, had raised the rent by a full equivalent for the tax. But whatever raises the lowest ground-rents, raises all others, since each exceeds the lowest by the market value of its peculiar advantages. If therefore, the tax on ground-rents were a fixed sum Per square foot, the more valuable situations paying no more than those

least in request, this fixed payment would ultimately fall on the occupier, Suppose the lowest ground-rent to be 10l. per acre, and the highest 1000l., a tax of 11. per acre on ground-rents would ultimately raise the former to 11!., and the latter consequently to 1001l., since the difference of value between the two situations would be exactly what it was before: the annual pound, therefore, would be paid by the occupier. But a tax on ground-rent is supposed to be a portion of a house-tax, which is not a fixed payment, but a percentage on the rent. The cheapest site, therefore, being supposed as befors to pay 11, the dearest would pay 100l., of which only the 1.l. could be thrown upon the occupier, since the rent would still be only raised to 10011. Conse. uently, 99t. of the 100l. levied from the expensive site, would fall on the ground-landlord. A house-tax thus requires to be considered in a double aspect, as a tax on all occupiers of houses, and a tax on ground-rents. In the vast majority of houses, the ground-rent forms but a small proportion of the annual payment made for the house, and nearly all the tax falls on the occupier. It is only in exceptional cases, like that of the fa. vourite situations in large towns, that the predominant element in the rent of the house is the ground-rent; and among the very few kinds of income which are fit subjects for peculiar taxation, these ground-rents hold the principal place, being the most gigantic example extant of enormous accessions of riches acquired rapidly, and in many cases unexpectedly, by a few families, from the mere accident of their pos. sessing certain tracts of land, without their having themselves aided in the acquisition by the smallest exertion, outlay, or risk. So far therefore as a house-tax falls on the ground-landlord, it is liable to no valid objection. In so far as it falls on the occupier, if justly proportioned to the value of the house, it is one of the fairest and most unobjectionable of all taxes. No i. of a person's expenditure is a etter criterion of his means, or bears, on the whole, more nearly the same proportion to them. A house-tax is a nearer approach to a fair income-tax, than a direct assessment on income can easily be; having the great advantage, that it makes spontaneously all the allowances which it is so difficult to make, and so impracticable to make exactly, in assessing an incometax: for if what a person pays in houserent is a test of anything, it is a test not of what he possesses, but of what he thinks he can afford to spend. The equality of this tax can only be seriously questioned on two grounds. The first is, that a miser may escape it. This objection applies to all taxes on expenditure: nothing but a direct tax on income can reach a miser. But as misers do not now hoard their treasure, but investitin productive employments, it not only adds to the national wealth, and consequently to the general means of paying taxes, but the payment claimable from itself is only transferred from the principal sum to the income afterwards derived from it, which pays taxes as soon as it comes to be expended. The second objection is that a person may require a larger and more expensive house, not from having greater means, but from having a larger family. Of this, however, he is not entitled to complain; since having a large family is at a person's own choice: and, so far as concerns the public interest, is a thing rather to be discouraged than promoted.* * Another common objection is that large and expensive accommodation is often reuired, not as a residence, but for business. But it is an admitted principle that buildings or portions of buildings occupied exclusively for business, such as shops, warehouses, or manufactories, ought to be exempted from house-tax. The plea that persons in business may be compelled to live in situations, such as the great thoroughfares of London, where house-rent is, at a monopoly rate, seems to me unworthy of regard; since no one does so but because the extra profit which he expects to derive from the situation, is more than an equivalent to him for the extra cost. But in any case, the bulk of the tax on this extra rent will not fall on him, but on the ground-landlord. It has been also objected that house-rent in the rural districts is much lower than in towns, and lower in some towns and in some rural districts than in others : so that a tax proportioned to it would have a corresponding inequality of pressure. To this, however,

A large portion of the taxation of this country is raised by a house-tax. The parochial taxation of the towns entirely, and of the rural districts partially, consists of an assessment on house-rent. The window-tax, which was also a house-tax, but of a bad kind, operating as a tax on light, and a cause of deformity in building, was exchanged in 1851 for a house-tax properly so called, but on a much lower scale than that which existed previously to 1834. It is to be lamented that the new tax retains the unjust principle on which the old house-tax was assessed, and which contributed quite as much as the selfishness of the middle classes to produce the outcry against the tax. The public, were justly scandalized on learning that residences like Chatsworth or Belvoir were only rated on an imaginary rent of perhaps 200l. a year, under the pretext that owing to the great expense of keeping them up, they could not be let for more. Probably, indeed, they could not be let even for that, and if the argument were a fair one, the ought not to have been taxed at all. But a house-tax is not intended as a tax on incomes derived from houses, but on expenditure incurred for them. The thing which it is wished to ascertain is what a house costs to the person who lives in it, not what it would bring in if let to some one else. When the occupier is not the owner, and does not hold on a repairing lease, the rent he pays is the measure of what the house costs him: but when he is the owner, some other measure must be sought. A valuation should be made of the house, not at what it would sell for, but at what would be the cost of rebuilding it, and this valuation might

it may be answered, that in places where house rent is low, persons of the same amount of income usually live in larger and better houses, and thus expend in house: rent more nearly the same proportion of their incomes than might at first sight appear. Or if not, the probability will be, that many of them live in those places precisely because they are too poor to live else: where, and have therefore the strongest claim to be taxed lightly. In some cases, it is precisely because the people are poor, that house-rent remains low.

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be periodically corrected by an allowance for what it had lost in value by time, or gained by repairs and improvements. The amount of the amended valuation would form a principal sum, the interest of which, at the current price of the public funds, would form the annual value at which the building should be assessed to the tax. As incomes below a certain amount ought to be exempt from income-tax, so ought houses below a certain value,

from house-tax, on the universal prin. ciple of sparing from all taxation the absolute necessaries of healthful existence. In order that the occupiers of lodgings, as well as of houses, might benefit, as injustice they ought, by this exemption, it might be optional with the owners to have every portion of a house which is occupied by a separate tenant, valued and assessed separately, i. is now usually the case with chamerS.

CHAPTER IV.

of TAXES ON COMMODITIE8.

§ 1. By taxes on commodities are commonly meant, those which are levied either on the producers, or on the carriers or dealers who intervene between them and the final purchasers for consumption. Taxes imposed directly on the consumers of particular commodities, such as a house-tax, or the tax in this country on horses and carriages, might be called taxes on commodities, but are not ; the phrase being, by custom, confined to indirect taxes—those which are advanced by one person, to be, as is expected and intended, reimbursed by another. Taxes on commodities are either on roduction within the country, or on importation into it, or on conveyance or sale within it; and are classed respectively as excise, customs, or tolls and transit duties. To whichever class they belong, and at whatever stage in the progress of the community they may be imposed, they are equivalent to an increase of the cost of production; using that term in its most enlarged sense, which includes the cost of transport and distribution, or, in common phrase, of bringing the commodity to market. When the cost of production is increased artificially by a tax, the effect is the same as when it is increased by natural causes. If only one or a few commodities are affected their value

and price rise, so as to compensate the producer or dealer for the peculiar bur. then ; but if there were a tax on all commodities, exactly proportioned to their value, no such compensation would be obtained: there would neither be a general rise of values, which is an absurdity, nor of prices, which de

end on causes entirely different. There would, however, as Mr. M'Cul. loch has pointed out, be a disturbance of values, some falling, others rising, owing to a circumstance, the effect of which on values and prices we formerly discussed; the different durability of the capital employed in different occupations. The gross produce of industry consists of two parts; one portion serving to replace the capital consumed, while the other portion is

rofit. Now equal capitals in two

ranches of production must have equal expectations of profit; but if a greater portion of the one than of the other is fixed capital, or if that fixed capital is more durable, there will be a less con. sumption of capital in the year, and less will be required to replace it, so that the profit, if absolutely the same, will form a greater proportion of the annual returns. To derive from a capital of 1000l. a profit of 100l., the one producer may have to sell produce to the value of 1100l., the other only to the value of 500l. If on these two branches of industry a tax be imposed of five per cent ad valorem, the last will be charged only with 25l., the first with 55l.; leaving to the one 75l. profit, to the other only 45l. To equalize, therefore, their expectation of profit, the one commodity must rise in price, or the other must fall, or both : commodities made chiefly by immediate labour must rise in value, as compared with those which are chiefly made by machinery. It is unnecessary to prosecute this branch of the inquiry any further.

§ 2. A tax on any one commodity, whether laid on its production, its importation, its carriage from place to place, or its sale, and whether the tax be a fixed sum of money for a given quantity of the commodity, or an ad valorem duty, will, as a general rule, raise the value and price of the commodity by at least the amount of the tax. There are few cases in which it does not raise them by more than that amount. In the first place, there are few taxes on production on account of which it is not found or deemed necessary to impose restrictive regulations on the manufacturers or dealers, in order to check evasions of the tax. These regulations are always sources of trouble and annoyance, and generally of expense, for all of which, being peculiar disadvantages, the producers or dealers must have compensation in the price of their commodity. These restrictions also frequently interfere with the processes of manufacture, requiring the producer to carry on his operations in the way most convenient to therevenue, though not the cheapest, or most efficient for purposes of production. Any regulations whatever, enforced by law, make it difficult for the producer to adopt new and improved processes. Further, the necessity of advancing the tax obliges producers and dealers to carry on their business with larger capitals than would otherwise, be necessary, on the whole of which they must receive the ordinary rate of profit, though a part only is employed in defraying the real expenses of production or importation. The price

of the article must be such as to afford a profit on more than its natural value, instead of a profit on only its natural value. A part of the capital of the country, in short, is not employed in production, but in advances to the state, repaid in the price of goods; and the consumers must give an indemnity to the sellers, equal to the profit which they could have made on the same capital if really employed in production.* Neither ought it to be forgotten, that whatever renders a larger capital necessary in any trade or business, limits the competition in that business, and by giving something like a monopoly to a few dealers, may enable them either to keep up the price beyond what would afford the ordinary rate of profit, or to obtain the ordinary rate of profit with a less degree of exertion for improving and cheapening their commodity. In these several modes, taxes on commodities often cost to the consumer, through the increased price of the article, much more than they bring into the treasury of the state. There is still another consideration. The higher price necessitated by the tax, almost always checks the demand for the commodity; and sinee there are many improvements in production which, to make them practicable, require a certain extent of demand, such improvements are obstructed, and many of them

revented altogether. It is a wellF. fact, that the branches of production in which fewest improvements are made, are those with which the revenue officer interferes; and that nothing, in general, gives a greater impulse to improvements in the production of a commodity, than taking off a tax which narrowed the market for it.

* It is true, this does not constitute, as it at first sight appears to do, a case of taking more out of the pockets of the people than the state receives; since if the state needs the advance, and gets it in this manner, it can dispense with an equivalent amount, of borrowing in stock or exchequer bills. But it is more economical that the necessities of the state should be o from the disposable capital in the hands of the lending class, than by an artificial addition to the expenses of one or several classes of producers or dealers.

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§ 3. Such are the effects of taxes on commodities, considered generally; but as there are some commodities (those composing the necessaries of the labourer) of which the values have an influence on the distribution of wealth among different classes of the commumity, it is requisite to trace the effects of taxes on those particular articles somewhat farther. If a tax be laid, say on corn, and the price rises in proportion to the tax, the rise of price may operate in two ways. First: it may lower the condition of the labouring classes; temporarily indeed it can scarcely fail to do so. . If it diminishes their consumption of the produce of the earth, or makes them resort to a food which the soil produces more abundantly, and therefore more cheaply, it to that extent contributes to throw back agriculture upon more fertile lands or less costly processes, and to lower the value and price of corn; which therefore ultimately settles at a price, increased not by the whole amount of the tax, but by only a part of its amount. Secondly, however, it may happen that the dearness of the taxed food does not lower the habitual standard of the labourer's requirements, but that wages, on the contrary, through an action on population, rise, in a shorter or longer period, so as to compensate the labourers for their portion of the tax; the compensation being of course at the expense of profits. Taxes on necessaries must thus have one of two effects. Either they lower the condition of the labouring classes; or they exact from the owners of capital, in addition to the amount due to the state on their own necessaries, the amount due on those consumed by the labourers. In the last case, the tax on necessaries, like a tax on wages, is equivalent to a peculiar tax on profits; which is, like all

other partial taxation, unjust, and is specially prejudicial to the increase of i. national wealth. It remains to speak of the effect on rent. Assuming (what is usually the fact) that the consumption of food is not diminished, the same cultivation as before will be necessary to supply the wants of the community; the margin of cultivation, to use Dr. Chalmers' expression, remains where it was ; and the same land or capital which, as the least productive, already regulated the value and price of the whole produce, will continue to regulate them. The effect which a tax on agricultural produce will have on rent, depends on its affecting or not affecting the difference between the return to this least productive land or capital, and the returns to other lands and capitals. Now this depends on the manner in which the tax is imposed. If it is an ad valorem tax, or what is the same thing, a fixed proportion of the produce, such as tithe for example, it evidently lowers cornrents. For it takes more corn from the better lands than from the worse; and exactly in the degree in which they are better; land of twice the productiveness paying twice as much to the tithe, Whatever takes more from the greater of two quantities than from the less, diminishes the difference between them. The imposition of a tithe on corn would take a tithe also from cornrent: for if we reduce a series of numbers by a tenth each, the differences between them are reduced one-tenth. For example, let there be five qualities of land, which severally yield, on the same extent of ground and with the same expenditure, 100, 90, 80, 70, and 60 bushels of wheat; the last of these being the lowest quality which the demand for food renders it neces. sary to cultivate. The rent of these lands will be as follows:-

The land producing 100 bushels will yield a rent of 100–60, or 40 bushels.

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92 90—60, or 30 , , 22 80–60, or 20 2x 25 70—60, or 10 , , xx. no rent.

Now let a tithe be imposed, which land 10, 9, 8, 7, and 6 bushels re. takes from these five pieces of spectively, the fifth quality still

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