Of Taxes

The private revenue of individuals, it has been shown in the first book

of this Inquiry, arises, ultimately from three different sources; rent,

profit, and wages. Every tax must finally be paid from some one or

other of those three different sources of revenue, or from all of them

indifferently. I shall endeavour to give the best account I can, first,

of those taxes which, it is intended should fall upon rent; secondly, of
/> those which, it is intended should fall upon profit; thirdly, of those

which, it is intended should fall upon wages; and fourthly, of those

which, it is intended should fall indifferently upon all those three

different sources of private revenue. The particular consideration of

each of these four different sorts of taxes will divide the second part

of the present chapter into four articles, three of which will require

several other subdivisions. Many of these taxes, it will appear from

the following review, are not finally paid from the fund, or source of

revenue, upon which it is intended they should fall.

Before I enter upon the examination of particular taxes, it is necessary

to premise the four following maximis with regard to taxes in general.

1. The subjects of every state ought to contribute towards the support

of the government, as nearly as possible, in proportion to their

respective abilities; that is, in proportion to the revenue which they

respectively enjoy under the protection of the state. The expense of

government to the individuals of a great nation, is like the expense of

management to the joint tenants of a great estate, who are all obliged

to contribute in proportion to their respective interests in the estate.

In the observation or neglect of this maxim, consists what is called the

equality or inequality of taxation. Every tax, it must be observed once

for all, which falls finally upon one only of the three sorts of revenue

above mentioned, is necessarily unequal, in so far as it does not affect

the other two. In the following examination of different taxes, I shall

seldom take much farther notice of this sort of inequality; but shall,

in most cases, confine my observations to that inequality which is

occasioned by a particular tax falling unequally upon that particular

sort of private revenue which is affected by it.

2. The tax which each individual is bound to pay, ought to be certain

and not arbitrary. The time of payment, the manner of payment, the

quantity to be paid, ought all to be clear and plain to the contributor,

and to every other person. Where it is otherwise, every person subject

to the tax is put more or less in the power of the tax-gatherer, who can

either aggravate the tax upon any obnoxious contributor, or extort, by

the terror of such aggravation, some present or perquisite to himself.

The uncertainty of taxation encourages the insolence, and favours the

corruption, of an order of men who are naturally unpopular, even where

they are neither insolent nor corrupt. The certainty of what each

individual ought to pay is, in taxation, a matter of so great

importance, that a very considerable degree of inequality, it appears,

I believe, from the experience of all nations, is not near so great an

evil as a very small degree of uncertainty.

3. Every tax ought to be levied at the time, or in the manner, in which

it is most likely to be convenient for the contributor to pay it. A tax

upon the rent of land or of houses, payable at the same term at which

such rents are usually paid, is levied at the time when it is most

likely to be convenient for the contributor to pay; or when he is most

likely to have wherewithall to pay. Taxes upon such consumable goods

as are articles of luxury, are all finally paid by the consumer, and

generally in a manner that is very convenient for him. He pays them

by little and little, as he has occasion to buy the goods. As he is at

liberty too, either to buy or not to buy, as he pleases, it must be his

own fault if he ever suffers any considerable inconveniency from such


4. Every tax ought to be so contrived, as both to take out and to keep

out of the pockets of the people as little as possible, over and above

what it brings into the public treasury of the state. A tax may either

take out or keep out of the pockets of the people a great deal more than

it brings into the public treasury, in the four following ways. First,

the levying of it may require a great number of officers, whose salaries

may eat up the greater part of the produce of the tax, and whose

perquisites may impose another additional tax upon the people. Secondly,

it may obstruct the industry of the people, and discourage them from

applying to certain branches of business which might give maintenance

and employment to great multitudes. While it obliges the people to pay,

it may thus diminish, or perhaps destroy, some of the funds which might

enable them more easily to do so. Thirdly, by the forfeitures and

other penalties which those unfortunate individuals incur, who attempt

unsuccessfully to evade the tax, it may frequently ruin them, and

thereby put an end to the benefit which the community might have

received from the employment of their capitals. An injudicious tax

offers a great temptation to smuggling. But the penalties of smuggling

must arise in proportion to the temptation. The law, contrary to all the

ordinary principles of justice, first creates the temptation, and then

punishes those who yield to it; and it commonly enhances the punishment,

too, in proportion to the very circumstance which ought certainly to

alleviate it, the temptation to commit the crime. {See Sketches of the

History of Man page 474, and Seq.} Fourthly, by subjecting the people to

the frequent visits and the odious examination of the tax-gatherers, it

may expose them to much unnecessary trouble, vexation, and oppression;

and though vexation is not, strictly speaking, expense, it is certainly

equivalent to the expense at which every man would be willing to redeem

himself from it. It is in some one or other of these four different

ways, that taxes are frequently so much more burdensome to the people

than they are beneficial to the sovereign.

The evident justice and utility of the foregoing maxims have recommended

them, more or less, to the attention of all nations. All nations have

endeavoured, to the best of their judgment, to render their taxes

as equal as they could contrive; as certain, as convenient to the

contributor, both the time and the mode of payment, and in proportion

to the revenue which they brought to the prince, as little burdensome

to the people. The following short review of some of the principal taxes

which have taken place in different ages and countries, will show, that

the endeavours of all nations have not in this respect been equally


ARTICLE I.--Taxes upon Rent--Taxes upon the Rent of Land.

A tax upon the rent of land may either be imposed according to a certain

canon, every district being valued at a curtain rent, which valuation is

not afterwards to be altered; or it may be imposed in such a manner, as

to vary with every variation in the real rent of the land, and to rise

or fall with the improvement or declension of its cultivation.

A land tax which, like that of Great Britain, is assessed upon each

district according to a certain invariable canon, though it should

be equal at the time of its first establishment, necessarily becomes

unequal in process of time, according to the unequal degrees of

improvement or neglect in the cultivation of the different parts of the

country. In England, the valuation, according to which the different

counties and parishes were assessed to the land tax by the 4th of

William and Mary, was very unequal even at its first establishment.

This tax, therefore, so far offends against the first of the four maxims

above mentioned. It is perfectly agreeable to the other three. It is

perfectly certain. The time of payment for the tax, being the same as

that for the rent, is as convenient as it can be to the contributor.

Though the landlord is, in all cases, the real contributor, the tax

is commonly advanced by the tenant, to whom the landlord is obliged

to allow it in the payment of the rent. This tax is levied by a much

smaller number of officers than any other which affords nearly the same

revenue. As the tax upon each district does not rise with the rise of

the rent, the sovereign does not share in the profits of the landlord's

improvements. Those improvements sometimes contribute, indeed, to the

discharge of the other landlords of the district. But the aggravation of

the tax, which this may sometimes occasion upon a particular estate, is

always so very small, that it never can discourage those improvements,

nor keep down the produce of the land below what it would otherwise rise

to. As it has no tendency to diminish the quantity, it can have none to

raise the price of that produce. It does not obstruct the industry of

the people; it subjects the landlord to no other inconveniency besides

the unavoidable one of paying the tax. The advantage, however, which the

land-lord has derived from the invariable constancy of the valuation, by

which all the lands of Great Britain are rated to the land-tax, has been

principally owing to some circumstances altogether extraneous to the

nature of the tax.

It has been owing in part, to the great prosperity of almost every part

of the country, the rents of almost all the estates of Great Britain

having, since the time when this valuation was first established, been

continually rising, and scarce any of them having fallen. The landlords,

therefore, have almost all gained the difference between the tax which

they would have paid, according to the present rent of their estates,

and that which they actually pay according to the ancient valuation.

Had the state of the country been different, had rents been gradually

falling in consequence of the declension of cultivation, the landlords

would almost all have lost this difference. In the state of things which

has happened to take place since the revolution, the constancy of the

valuation has been advantageous to the landlord and hurtful to

the sovereign. In a different state of things it might have been

advantageous to the sovereign and hurtful to the landlord.

As the tax is made payable in money, so the valuation of the land is

expressed in money. Since the establishment of this valuation, the value

of silver has been pretty uniform, and there has been no alteration in

the standard of the coin, either as to weight or fineness. Had silver

risen considerably in its value, as it seems to have done in the course

of the two centuries which preceded the discovery of the mines

of America, the constancy of the valuation might have proved very

oppressive to the landlord. Had silver fallen considerably in its value,

as it certainly did for about a century at least after the discovery

of those mines, the same constancy of valuation would have reduced very

much this branch of the revenue of the sovereign. Had any considerable

alteration been made in the standard of the money, either by sinking the

same quantity of silver to a lower denomination, or by raising it to

a higher; had an ounce of silver, for example, instead of being coined

into five shillings and two pence, been coined either into pieces which

bore so low a denomination as two shillings and seven pence, or into

pieces which bore so high a one as ten shillings and four pence, it

would, in the one case, have hurt the revenue of the proprietor, in the

other that of the sovereign.

In circumstances, therefore, somewhat different from those which have

actually taken place, this constancy of valuation might have been a very

great inconveniency, either to the contributors or to the commonwealth.

In the course of ages, such circumstances, however, must at some time or

other happen. But though empires, like all the other works of men, have

all hitherto proved mortal, yet every empire aims at immortality. Every

constitution, therefore, which it is meant should be as permanent as

the empire itself, ought to be convenient, not in certain circumstances

only, but in all circumstances; or ought to be suited, not to those

circumstances which are transitory, occasional, or accidental, but to

those which are necessary, and therefore always the same.

A tax upon the rent of land, which varies with every variation of the

rent, or which rises and falls according to the improvement or neglect

of cultivation, is recommended by that sect of men of letters in France,

who call themselves the economists, as the most equitable of all taxes.

All taxes, they pretend, fall ultimately upon the rent of land, and

ought, therefore, to be imposed equally upon the fund which must finally

pay them. That all taxes ought to fall as equally as possible upon

the fund which must finally pay them, is certainly true. But without

entering into the disagreeable discussion of the metaphysical arguments

by which they support their very ingenious theory, it will sufficiently

appear, from the following review, what are the taxes which fall finally

upon the rent of the land, and what are those which fall finally upon

some other fund.

In the Venetian territory, all the arable lands which are given in lease

to farmers are taxed at a tenth of the rent. {Memoires concernant les

Droits, p. 240, 241.} The leases are recorded in a public register,

which is kept by the officers of revenue in each province or district.

When the proprietor cultivates his own lands, they are valued according

to an equitable estimation, and he is allowed a deduction of one-fifth

of the tax; so that for such land he pays only eight instead of ten per

cent. of the supposed rent.

A land-tax of this kind is certainly more equal than the land-tax

of England. It might not, perhaps, be altogether so certain, and the

assessment of the tax might frequently occasion a good deal more trouble

to the landlord. It might, too, be a good deal more expensive in the


Such a system of administration, however, might, perhaps, be contrived,

as would in a great measure both prevent this uncertainty, and moderate

this expense.

The landlord and tenant, for example, might jointly be obliged to record

their lease in a public register. Proper penalties might be enacted

against concealing or misrepresenting any of the conditions; and if

part of those penalties were to be paid to either of the two parties

who informed against and convicted the other of such concealment or

misrepresentation, it would effectually deter them from combining

together in order to defraud the public revenue. All the conditions of

the lease might be sufficiently known from such a record.

Some landlords, instead of raising the rent, take a fine for the renewal

of the lease. This practice is, in most cases, the expedient of a

spendthrift, who, for a sum of ready money sells a future revenue of

much greater value. It is, in most cases, therefore, hurtful to the

landlord; it is frequently hurtful to the tenant; and it is always

hurtful to the community. It frequently takes from the tenant so great

a part of his capital, and thereby diminishes so much his ability to

cultivate the land, that he finds it more difficult to pay a small

rent than it would otherwise have been to pay a great one. Whatever

diminishes his ability to cultivate, necessarily keeps down, below what

it would otherwise have been, the most important part of the revenue of

the community. By rendering the tax upon such fines a good deal heavier

than upon the ordinary rent, this hurtful practice might be discouraged,

to the no small advantage of all the different parties concerned, of the

landlord, of the tenant, of the sovereign, and of the whole community.

Some leases prescribe to the tenant a certain mode of cultivation, and a

certain succession of crops, during the whole continuance of the lease.

This condition, which is generally the effect of the landlord's

conceit of his own superior knowledge (a conceit in most cases very

ill-founded), ought always to be considered as an additional rent, as a

rent in service, instead of a rent in money. In order to discourage the

practice, which is generally a foolish one, this species of rent might

be valued rather high, and consequently taxed somewhat higher than

common money-rents.

Some landlords, instead of a rent in money, require a rent in kind, in

corn, cattle, poultry, wine, oil, etc.; others, again, require a rent

in service. Such rents are always more hurtful to the tenant than

beneficial to the landlord. They either take more, or keep more out

of the pocket of the former, than they put into that of the latter. In

every country where they take place, the tenants are poor and beggarly,

pretty much according to the degree in which they take place. By

valuing, in the same manner, such rents rather high, and consequently

taxing them somewhat higher than common money-rents, a practice which

is hurtful to the whole community, might, perhaps, be sufficiently


When the landlord chose to occupy himself a part of his own lands,

the rent might be valued according to an equitable arbitration of the

farmers and landlords in the neighbourhood, and a moderate abatement of

the tax might be granted to him, in the same manner as in the Venetian

territory, provided the rent of the lands which he occupied did not

exceed a certain sum. It is of importance that the landlord should be

encouraged to cultivate a part of his own land. His capital is generally

greater than that of the tenant, and, with less skill, he can frequently

raise a greater produce. The landlord can afford to try experiments, and

is generally disposed to do so. His unsuccessful experiments occasion

only a moderate loss to himself. His successful ones contribute to the

improvement and better cultivation of the whole country. It might be of

importance, however, that the abatement of the tax should encourage

him to cultivate to a certain extent only. If the landlords should, the

greater part of them, be tempted to farm the whole of their own lands,

the country (instead of sober and industrious tenants, who are bound by

their own interest to cultivate as well as their capital and skill will

allow them) would be filled with idle and profligate bailiffs, whose

abusive management would soon degrade the cultivation, and reduce the

annual produce of the land, to the diminution, not only of the revenue

of their masters, but of the most important part of that of the whole


Such a system of administration might, perhaps, free a tax of this kind

from any degree of uncertainty, which could occasion either oppression

or inconveniency to the contributor; and might, at the same time, serve

to introduce into the common management of land such a plan of policy

as might contribute a good deal to the general improvement and good

cultivation of the country.

The expense of levying a land-tax, which varied with every variation of

the rent, would, no doubt, be somewhat greater than that of levying one

which was always rated according to a fixed valuation. Some additional

expense would necessarily be incurred, both by the different

register-offices which it would be proper to establish in the different

districts of the country, and by the different valuations which might

occasionally be made of the lands which the proprietor chose to occupy

himself. The expense of all this, however, might be very moderate, and

much below what is incurred in the levying of many other taxes, which

afford a very inconsiderable revenue in comparison of what might easily

be drawn from a tax of this kind.

The discouragement which a variable land-tax of this kind might give to

the improvement of land, seems to be the most important objection which

can be made to it. The landlord would certainly be less disposed to

improve, when the sovereign, who contributed nothing to the expense, was

to share in the profit of the improvement. Even this objection might,

perhaps, be obviated, by allowing the landlord, before he began his

improvement, to ascertain, in conjunction with the officers of revenue,

the actual value of his lands, according to the equitable arbitration of

a certain number of landlords and farmers in the neighbourhood, equally

chosen by both parties: and by rating him, according to this valuation,

for such a number of years as might be fully sufficient for his complete

indemnification. To draw the attention of the sovereign towards the

improvement of the land, from a regard to the increase of his own

revenue, is one or the principal advantages proposed by this species of

land-tax. The term, therefore, allowed, for the indemnification of the

landlord, ought not to be a great deal longer than what was necessary

for that purpose, lest the remoteness of the interest should discourage

too much this attention. It had better, however, be somewhat too long,

than in any respect too short. No incitement to the attention of the

sovereign can ever counterbalance the smallest discouragement to that of

the landlord. The attention of the sovereign can be, at best, but a very

general and vague consideration of what is likely to contribute to the

better cultivation of the greater part of his dominions. The attention

of the landlord is a particular and minute consideration of what is

likely to be the most advantageous application of every inch of ground

upon his estate. The principal attention of the sovereign ought to be,

to encourage, by every means in his power, the attention both of

the landlord and of the farmer, by allowing both to pursue their own

interest in their own way, and according to their own judgment; by

giving to both the most perfect security that they shall enjoy the full

recompence of their own industry; and by procuring to both the most

extensive market for every part of their produce, in consequence of

establishing the easiest and safest communications, both by land and

by water, through every part of his own dominions, as well as the most

unbounded freedom of exportation to the dominions of all other princes.

If, by such a system of administration, a tax of this kind could be so

managed as to give, not only no discouragement, but, on the contrary,

some encouragement to the improvement or land, it does not appear likely

to occasion any other inconveniency to the landlord, except always the

unavoidable one of being obliged to pay the tax. In all the variations

of the state of the society, in the improvement and in the declension

of agriculture; in all the variations in the value of silver, and in all

those in the standard of the coin, a tax of this kind would, of its own

accord, and without any attention of government, readily suit itself to

the actual situation of things, and would be equally just and equitable

in all those different changes. It would, therefore, be much more proper

to be established as a perpetual and unalterable regulation, or as what

is called a fundamental law of the commonwealth, than any tax which was

always to be levied according to a certain valuation.

Some states, instead of the simple and obvious expedient of a register

of leases, have had recourse to the laborious and expensive one of an

actual survey and valuation of all the lands in the country. They have

suspected, probably, that the lessor and lessee, in order to defraud the

public revenue, might combine to conceal the real terms of the lease.

Doomsday-book seems to have been the result of a very accurate survey of

this kind.

In the ancient dominions of the king of Prussia, the land-tax is

assessed according to an actual survey and valuation, which is reviewed

and altered from time to time. {Memoires concurent les Droits, etc.

tom, i. p. 114, 115, 116, etc.} According to that valuation, the lay

proprietors pay from twenty to twenty-five per cent. of their revenue;

ecclesiastics from forty to forty-five per cent. The survey and

valuation of Silesia was made by order of the present king, it is said,

with great accuracy. According to that valuation, the lands belonging to

the bishop of Breslaw are taxed at twenty-five per cent. of their rent.

The other revenues of the ecclesiastics of both religions at fifty per

cent. The commanderies of the Teutonic order, and of that of Malta,

at forty per cent. Lands held by a noble tenure, at thirty-eight and

one-third per cent. Lands held by a base tenure, at thirty-five and

one-third per cent.

The survey and valuation of Bohemia is said to have been the work of

more than a hundred years. It was not perfected till after the peace of

1748, by the orders of the present empress queen. {Id. tom i. p.85, 84.}

The survey of the duchy of Milan, which was begun in the time of Charles

VI., was not perfected till after 1760 It is esteemed one of the most

accurate that has ever been made. The survey of Savoy and Piedmont was

executed under the orders of the late king of Sardinia. {Id. p. 280,

etc.; also p, 287. etc. to 316.}

In the dominions of the king of Prussia, the revenue of the church

is taxed much higher than that of lay proprietors. The revenue of the

church is, the greater part of it, a burden upon the rent of land. It

seldom happens that any part of it is applied towards the improvement

of land; or is so employed as to contribute, in any respect, towards

increasing the revenue of the great body of the people. His Prussian

majesty had probably, upon that account, thought it reasonable that it

should contribute a good deal more towards relieving the exigencies of

the state. In some countries, the lands of the church are exempted from

all taxes. In others, they are taxed more lightly than other lands. In

the duchy of Milan, the lands which the church possessed before 1575,

are rated to the tax at a third only or their value.

In Silesia, lands held by a noble tenure are taxed three per cent.

higher than those held by a base tenure. The honours and privileges of

different kinds annexed to the former, his Prussian majesty had probably

imagined, would sufficiently compensate to the proprietor a small

aggravation of the tax; while, at the same time, the humiliating

inferiority of the latter would be in some measure alleviated, by being

taxed somewhat more lightly. In other countries, the system of taxation,

instead of alleviating, aggravates this inequality. In the dominions of

the king of Sardinia, and in those provinces of France which are subject

to what is called the real or predial taille, the tax falls altogether

upon the lands held by a base tenure. Those held by a noble one are


A land tax assessed according to a general survey and valuation, how

equal soever it may be at first, must, in the course of a very moderate

period of time, become unequal. To prevent its becoming so would require

the continual and painful attention of government to all the variations

in the state and produce of every different farm in the country. The

governments of Prussia, of Bohemia, of Sardinia, and of the duchy

of Milan, actually exert an attention of this kind; an attention so

unsuitable to the nature of government, that it is not likely to be of

long continuance, and which, if it is continued, will probably, in the

long-run, occasion much more trouble and vexation than it can possibly

bring relief to the contributors.

In 1666, the generality of Montauban was assessed to the real or predial

taille, according, it is said, to a very exact survey and valuation.

{Memoires concernant les Droits, etc. tom. ii p. 139, etc.} By 1727,

this assessment had become altogether unequal. In order to remedy this

inconveniency, government has found no better expedient, than to impose

upon the whole generality an additional tax of a hundred and twenty

thousand livres. This additional tax is rated upon all the different

districts subject to the taille according to the old assessment. But it

is levied only upon those which, in the actual state of things, are by

that assessment under-taxed; and it is applied to the relief of those

which, by the same assessment, are over-taxed. Two districts, for

example, one of which ought, in the actual state of things, to be taxed

at nine hundred, the other at eleven hundred livres, are, by the old

assessment, both taxed at a thousand livres. Both these districts are,

by the additional tax, rated at eleven hundred livres each. But this

additional tax is levied only upon the district under-charged, and it is

applied altogether to the relief of that overcharged, which consequently

pays only nine hundred livres. The government neither gains nor loses

by the additional tax, which is applied altogether to remedy the

inequalities arising from the old assessment. The application is pretty

much regulated according to the discretion of the intendant of the

generality, and must, therefore, be in a great measure arbitrary.

Taxes which are proportioned, not in the Rent, but to the Produce of


Taxes upon the produce of land are, In reality, taxes upon the rent; and

though they may be originally advanced by the farmer, are finally paid

by the landlord. When a certain portion of the produce is to be paid

away for a tax, the farmer computes as well as he can, what the value

of this portion is, one year with another, likely to amount to, and he

makes a proportionable abatement in the rent which he agrees to pay to

the landlord. There is no farmer who does not compute beforehand what

the church tythe, which is a land tax of this kind, is, one year with

another, likely to amount to.

The tythe, and every other land tax of this kind, under the appearance

of perfect equality, are very unequal taxes; a certain portion of the

produce being in differrent situations, equivalent to a very different

portion of the rent. In some very rich lands, the produce is so great,

that the one half of it is fully sufficient to replace to the farmer his

capital employed in cultivation, together with the ordinary profits of

farming stock in the neighbourhood. The other half, or, what comes to

the same thing, the value of the other half, he could afford to pay

as rent to the landlord, if there was no tythe. But if a tenth of

the produce is taken from him in the way of tythe, he must require an

abatement of the fifth part of his rent, otherwise he cannot get back

his capital with the ordinary profit. In this case, the rent of the

landlord, instead of amounting to a half, or five-tenths of the whole

produce, will amount only to four-tenths of it. In poorer lands, on

the contrary, the produce is sometimes so small, and the expense of

cultivation so great, that it requires four-fifths of the whole produce,

to replace to the farmer his capital with the ordinary profit. In this

case, though there was no tythe, the rent of the landlord could amount

to no more than one-fifth or two-tenths of the whole produce. But if

the farmer pays one-tenth of the produce in the way of tythe, he must

require an equal abatement of the rent of the landlord, which will thus

be reduced to one-tenth only of the whole produce. Upon the rent of rich

lands the tythe may sometimes be a tax of no more than one-fifth part,

or four shillings in the pound; whereas upon that of poorer lands, it

may sometimes be a tax of one half, or of ten shillings in the pound.

The tythe, as it is frequently a very unequal tax upon the rent, so

it is always a great discouragement, both to the improvements of the

landlord, and to the cultivation of the farmer. The one cannot venture

to make the most important, which are generally the most expensive

improvements; nor the other to raise the most valuable, which are

generally, too, the most expensive crops; when the church, which lays

out no part of the expense, is to share so very largely in the profit.

The cultivation of madder was, for a long time, confined by the tythe to

the United Provinces, which, being presbyterian countries, and upon that

account exempted from this destructive tax, enjoyed a sort of monopoly

of that useful dyeing drug against the rest of Europe. The late attempts

to introduce the culture of this plant into England, have been made only

in consequence of the statute, which enacted that five shillings an acre

should be received in lieu of all manner of tythe upon madder.

As through the greater part of Europe, the church, so in many different

countries of Asia, the state, is principally supported by a land tax,

proportioned not to the rent, but to the produce of the land. In China,

the principal revenue of the sovereign consists in a tenth part of the

produce of all the lands of the empire. This tenth part, however, is

estimated so very moderately, that, in many provinces, it is said not

to exceed a thirtieth part of the ordinary produce. The land tax or land

rent which used to be paid to the Mahometan government of Bengal, before

that country fell into the hands of the English East India company, is

said to have amounted to about a fifth part of the produce. The land tax

of ancient Egypt is said likewise to have amounted to a fifth part.

In Asia, this sort of land tax is said to interest the sovereign in the

improvement and cultivation of land. The sovereigns of China, those of

Bengal while under the Mahometan govermnent, and those of ancient Egypt,

are said, accordingly, to have been extremely attentive to the making

and maintaining of good roads and navigable canals, in order to

increase, as much as possible, both the quantity and value of every part

of the produce of the land, by procuring to every part of it the most

extensive market which their own dominions could afford. The tythe

of the church is divided into such small portions that no one of its

proprietors can have any interest of this kind. The parson of a parish

could never find his account, in making a road or canal to a distant

part of the country, in order to extend the market for the produce of

his own particular parish. Such taxes, when destined for the maintenance

of the state, have some advantages, which may serve in some measure to

balance their inconveniency. When destined for the maintenance of the

church, they are attended with nothing but inconveniency.

Taxes upon the produce of land may be levied, either in kind, or,

according to a certain valuation in money.

The parson of a parish, or a gentleman of small fortune who lives upon

his estate, may sometimes, perhaps find some advantage in receiving,

the one his tythe, and the other his rent, in kind. The quantity to be

collected, and the district within which it is to be collected, are so

small, that they both can oversee, with their own eyes, the collection

and disposal of every part of what is due to them. A gentleman of great

fortune, who lived in the capital, would be in danger of suffering much

by the neglect, and more by the fraud, of his factors and agents, if the

rents of an estate in a distant province were to be paid to him in this

manner. The loss of the sovereign, from the abuse and depredation of his

tax-gatherers, would necessarily be much greater. The servants of the

most careless private person are, perhaps, more under the eye of their

master than those of the most careful prince; and a public revenue,

which was paid in kind, would suffer so much from the mismanagement

of the collectors, that a very small part of what was levied upon the

people would ever arrive at the treasury of the prince. Some part of the

public revenue of China, however, is said to be paid in this manner. The

mandarins and other tax-gatherers will, no doubt, find their advantage

in continuing the practice of a payment, which is so much more liable to

abuse than any payment in money.

A tax upon the produce of land, which is levied in money, may be levied,

either according to a valuation, which varies with all the variations of

the market price; or according to a fixed valuation, a bushel of wheat,

for example, being always valued at one and the same money price,

whatever may be the state of the market. The produce of a tax levied in

the former way will vary only according to the variations in the

real produce of the land, according to the improvement or neglect of

cultivation. The produce of a tax levied in the latter way will vary,

not only according to the variations in the produce of the land, but

according both to those in the value of the precious metals, and those

in the quantity of those metals which is at different times contained

in coin of the same denomination. The produce of the former will always

bear the same proportion to the value of the real produce of the land.

The produce of the latter may, at different times, bear very different

proportions to that value.

When, instead either of a certain portion of the produce of land, or of

the price of a certain portion, a certain sum of money is to be paid in

full compensation for all tax or tythe; the tax becomes, in this case,

exactly of the same nature with the land tax of England. It neither

rises nor falls with the rent of the land. It neither encourages nor

discourages improvement. The tythe in the greater part of those parishes

which pay what is called a modus, in lieu of all other tythe 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 anything, 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 all 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 rent, for which

it would for some time increase the competition. But the rents of

every class of houses for which the competition was diminished, would

necessarily be more or less reduced. As no part of this reduction,

however, could for any considerable time at least, affect the

building-rent, the whole of it must, in the long-run, necessarily fall

upon the ground-rent. The final payment of this tax, therefore, would

fall partly upon the inhabitant of the house, who, in order to pay his

share, would be obliged to give up a part of his conveniency; and partly

upon the owner of the ground, who, in order to pay his share, would be

obliged to give up a part of his revenue. In what proportion this final

payment would be divided between them, it is not, perhaps, very easy to

ascertain. The division would probably be very different in different

circumstances, and a tax of this kind might, according to those

different circumstances, affect very unequally, both the inhabitant of

the house and the owner of the ground.

The inequality with which a tax of this kind might fall upon the owners

of different ground-rents, would arise altogether from the accidental

inequality of this division. But the inequality with which it might fall

upon the inhabitants of different houses, would arise, not only

from this, but from another cause. The proportion of the expense of

house-rent to the whole expense of living, is different in the different

degrees of fortune. It is, perhaps, highest in the highest degree, and

it diminishes gradually through the inferior degrees, so as in general

to be lowest in the lowest degree. The necessaries of life occasion the

great expense of the poor. They find it difficult to get food, and

the greater part of their little revenue is spent in getting it. The

luxuries and vanities of life occasion the principal expense of the

rich; and a magnificent house embellishes and sets off to the best

advantage all the other luxuries and vanities which they possess. A tax

upon house-rents, therefore, would in general fall heaviest upon the

rich; and in this sort of inequality there would not, perhaps, be any

thing very unreasonable. It is not very unreasonable that the rich

should contribute to the public expense, not only in proportion to their

revenue, but something more than in that proportion.

The rent of houses, though it in some respects resembles the rent of

land, is in one respect essentially different from it. The rent of land

is paid for the use of a productive subject. The land which pays it

produces it. The rent of houses is paid for the use of an unproductive

subject. Neither the house, nor the ground which it stands upon, produce

anything. The person who pays the rent, therefore, must draw it from

some other source of revenue, distinct from and independent of this

subject. 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 must be paid from their revenue, whether derived from the wages of

labour, the profits of stock, or the rent of land. So far as it falls

upon the inhabitants, it is one of those taxes which fall, not upon one

only, but indifferently upon all the three different sources of revenue;

and is, in every respect, of the same nature as a tax upon any other

sort of consumable commodities. In general, there is not perhaps,

any one article of expense or consumption by which the liberality or

narrowness of a man's whole expense can be better judged of than by his

house-rent. A proportional tax upon this particular article of expense

might, perhaps, produce a more considerable revenue than any which has

hitherto been drawn from it in any part of Europe. If the tax, indeed,

was very high, the greater part of people would endeavour to evade it as

much as they could, by contenting themselves with smaller houses, and by

turning the greater part of their expense into some other channel.

The rent of houses might easily be ascertained with sufficient accuracy,

by a policy of the same kind with that which would be necessary for

ascertaining the ordinary rent of land. Houses not inhabited ought to

pay no tax. A tax upon them would fall altogether upon the proprietor,

who would thus be taxed for a subject which afforded him neither

conveniency nor revenue. 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 might 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

civilized 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 neat rent of their estates. It is the

accumulated expense of several successive generations, laid out upon

objects of great beauty and magnificence, indeed, but, in proportion

to what they cost, of very small exchangeable value. {Since the

first publication of this book, a tax nearly upon the above-mentioned

principles has been imposed.}

Ground-rents are a still more proper subject of taxation than the rent

of houses. A tax upon ground-rents would not raise the rent 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.

In the province of Holland, {Memoires concernant les Droits, etc. p.

223.} every house is taxed at two and a-half per cent. of its value,

without any regard, either to the rent which it actually pays, or to the

circumstance of its being tenanted or untenanted. There seems to be

a hardship in obliging the proprietor to pay a tax for an untenanted

house, from which he can derive no revenue, especially so very heavy a

tax. In Holland, where the market rate of interest does not exceed three

per cent., two and a-half per cent. upon the whole value of the house

must, in most cases, amount to more than a third of the building-rent,

perhaps of the whole rent. The valuation, indeed, according to which the

houses are rated, though very unequal, is said to be always below the

real value. When a house is rebuilt, improved, or enlarged, there is a

new valuation, and the tax is rated accordingly.

The contrivers of the several taxes which in England have, at different

times, been imposed upon houses, seem to have imagined that there was

some great difficulty in ascertaining, with tolerable exactness, what

was the real rent of every house. They have regulated their taxes,

therefore, according to some more obvious circumstance, such as they

had probably imagined would, in most cases, bear some proportion to the


The first tax of this kind was hearth-money; or a tax of two shillings

upon every hearth. In order to ascertain how many hearths were in the

house, it was necessary that the tax-gatherer should enter every room

in it. This odious visit rendered the tax odious. Soon after the

Revolution, therefore, it was abolished as a badge of slavery.

The next tax of this kind was a tax of two shillings upon every

dwelling-house inhabited. A house with ten windows to pay four shillings

more. A house with twenty windows and upwards to pay eight shillings.

This tax was afterwards so far altered, that houses with twenty windows,

and with less than thirty, were ordered to pay ten shillings, and those

with thirty windows and upwards to pay twenty shillings. The number of

windows can, in most cases, be counted from the outside, and, in all

cases, without entering every room in the house. The visit of the

tax-gatherer, therefore, was less offensive in this tax than in the


This tax was afterwards repealed, and in the room of it was established

the window-tax, which has undergone two several alterations and

augmentations. The window tax, as it stands at present (January 1775),

over and above the duty of three shillings upon every house in England,

and of one shilling upon every house in Scotland, lays a duty upon every

window, which in England augments gradually from twopence, the lowest

rate upon houses with not more than seven windows, to two shillings, the

highest rate upon houses with twenty-five windows and upwards.

The principal objection to all such taxes is their inequality; an

inequality of the worst kind, as they must frequently fall much heavier

upon the poor than upon the rich. A house of ten pounds rent in a

country town, may sometimes have more windows than a house of five

hundred pounds rent in London; and though the inhabitant of the former

is likely to be a much poorer man than that of the latter, yet, so far

as his contribution is regulated by the window tax, he must contribute

more to the support of the state. Such taxes are, therefore, directly

contrary to the first of the four maxims above mentioned. They do not

seem to offend much against any of the other three.

The natural tendency of the window tax, and of all other taxes upon

houses, is to lower rents. The more a man pays for the tax, the less, it

is evident, he can afford to pay for the rent. Since the imposition of

the window tax, however, the rents of houses have, upon the whole, risen

more or less, in almost every town and village of Great Britain, with

which I am acquainted. Such has been, almost everywhere, the increase of

the demand for houses, that it has raised the rents more than the window

tax could sink them; one of the many proofs of the great prosperity of

the country, and of the increasing revenue of its inhabitants. Had it

not been for the tax, rents would probably have risen still higher.

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

The revenue or profit arising from stock naturally divides itself into

two parts; that which pays the interest, and which belongs to the owner

of the stock; and that surplus part which is over and above what is

necessary for paying the interest.

This latter part of profit is evidently a subject not taxable directly.

It is the compensation, and, in most cases, it is no more than a very

moderate compensation for the risk and trouble of employing the

stock. The employer must have this compensation, otherwise he cannot,

consistently with his own interest, continue the employment. If he was

taxed directly, therefore, in proportion to the whole profit, he would

be obliged either to raise the rate of his profit, or to charge the tax

upon the interest of money; that is, to pay less interest. If he raised

the rate of his profit in proportion to the tax, the whole tax, though

it might be advanced by him, would be finally paid by one or other of

two different sets of people, according to the different ways in which

he might employ the stock of which he had the management. If he employed

it as a farming stock, in the cultivation of land, he could raise the

rate of his profit only by retaining a greater portion, or, what comes

to the same thing, the price of a greater portion, of the produce of the

land; and as this could be done only by a reduction of rent, the final

payment of the tax would fall upon the landlord. If he employed it as a

mercantile or manufacturing stock, he could raise the rate of his profit

only by raising the price of his goods; in which case, the final payment

of the tax would fall altogether upon the consumers of those goods. If

he did not raise the rate of his profit, he would be obliged to charge

the whole tax upon that part of it which was allotted for the interest

of money. He could afford less interest for whatever stock he borrowed,

and the whole weight of the tax would, in this case, fall ultimately

upon the interest of money. So far as he could not relieve himself from

the tax in the one way, he would be obliged to relieve himself in the


The interest of money seems, at first sight, a subject equally capable

of being taxed directly as the rent of land. Like the rent of land,

it is a neat produce, which remains, after completely compensating the

whole risk and trouble of employing the stock. As a tax upon the rent of

land cannot raise rents, because the neat produce which remains, after

replacing the stock of the farmer, together with his reasonable profit,

cannot be greater after the tax than before it, so, for the same reason,

a tax upon the interest of money could not raise the rate of interest;

the quantity of stock or money in the country, like the quantity of

land, being supposed to remain the same after the tax as before it.

The ordinary rate of profit, it has been shewn, in the first book,

is everywhere regulated by the quantity of stock to be employed, in

proportion to the quantity of the employment, or of the business which

must be done by it. But the quantity of the employment, or of the

business to be done by stock, could neither be increased nor diminished

by any tax upon the interest of money. If the quantity of the stock to

be employed, therefore, was neither increased nor diminished by it,

the ordinary rate of profit would necessarily remain the same. But the

portion of this profit, necessary for compensating the risk and trouble

of the employer, would likewise remain the same; that risk and trouble

being in no respect altered. The residue, therefore, that portion which

belongs to the owner of the stock, and which pays the interest of money,

would necessarily remain the same too. At first sight, therefore, the

interest of money seems to be a subject as fit to be taxed directly as

the rent of land.

There are, however, two different circumstances, which render the

interest of money a much less proper subject of direct taxation than the

rent of land.

First, the quantity and value of the land which any man possesses, can

never be a secret, and can always be ascertained with great exactness.

But the whole amount of the capital stock which he possesses is almost

always a secret, and can scarce ever be ascertained with tolerable

exactness. It is liable, besides, to almost continual variations. A year

seldom passes away, frequently not a month, sometimes scarce a single

day, in which it does not rise or fall more or less. An inquisition into

every man's private circumstances, and an inquisition which, in order

to accommodate the tax to them, watched over all the fluctuations of his

fortune, would be a source of such continual and endless vexation as no

person could support.

Secondly, land is a subject which cannot be removed; whereas stock

easily may. The proprietor of land is necessarily a citizen of the

particular country in which his estate lies. The proprietor of stock is

properly a citizen of the world, and is not necessarily attached to any

particular country. He would be apt to abandon the country in which he

was exposed to a vexatious inquisition, in order to be assessed to a

burdensome tax; and would remove his stock to some other country, where

he could either carry on his business, or enjoy his fortune more at his

ease. By removing his stock, he would put an end to all the industry

which it had maintained in the country which he left. Stock cultivates

land; stock employs labour. A tax which tended to drive away stock from

any particular country, would so far tend to dry up every source of

revenue, both to the sovereign and to the society. Not only the

profits of stock, but the rent of land, and the wages of labour, would

necessarily be more or less diminished by its removal.

The nations, accordingly, who have attempted to tax the revenue arising

from stock, instead of any severe inquisition of this kind, have been

obliged to content themselves with some very loose, and, therefore, more

or less arbitrary estimation. The extreme inequality and uncertainty of

a tax assessed in this manner, can be compensated only by its extreme

moderation; in consequence of which, every man finds himself rated

so very much below his real revenue, that he gives himself little

disturbance though his neighbour should be rated somewhat lower.

By what is called the land tax in England, it was intended that the

stock should be taxed in the same proportion as land. When the tax upon

land was at four shillings in the pound, or at one-fifth of the supposed

rent, it was intended that stock should be taxed at one-fifth of the

supposed interest. When the present annual land tax was first imposed,

the legal rate of interest was six per cent. Every hundred pounds stock,

accordingly, was supposed to be taxed at twenty-four shillings, the

fifth part of six pounds. Since the legal rate of interest has been

reduced to five per cent. every hundred pounds stock is supposed to be

taxed at twenty shillings only. The sum to be raised, by what is called

the land tax, was divided between the country and the principal towns.

The greater part of it was laid upon the country; and of what was laid

upon the towns, the greater part was assessed upon the houses. What

remained to be assessed upon the stock or trade of the towns (for the

stock upon the land was not meant to be taxed) was very much below the

real value of that stock or trade. Whatever inequalities, therefore,

there might be in the original assessment, gave little disturbance.

Every parish and district still continues to b