Thread by @adamsmithworks

Ready for more of #AdamSmith's thoughts on taxes from #WealthOfNations? Sure you are! (V.ii.e–h) #WealthOfTweets #SmithTweets

Taxes upon rent can also fall upon the rent of houses! House rent isn't like regular land-rent, though. It's split into two parts: the building-rent and the ground-rent. (V.ii.e.1) #WealthOfTweets #SmithTweets

Building-rent is really just the profit of the person who builds the building. Like all profit it's regulated by supply, demand, and the interest of money. (V.ii.e.2) #WealthOfTweets #SmithTweets"

Ground-rent is more like regular rent, but is also affected by how much people want to live somewhere. Ground-rent in cities, especially the capital, is higher than the country where there's lots of land available. (V.ii.e.3) #WealthOfTweets #SmithTweets

Taxes on house-rent don't affect building-rent. Builders are going to get their profit or they're going to stop building houses. They also don't fall entirely on ground-rent. They're paid by the renters. (V.ii.e.4) #WealthOfTweets #SmithTweets

Renters have a budget. Tax on rent means their budget will pay for a more modest home. Smith says this means everyone gets a worse home than they could otherwise afford, but not as much worse as if the tax applied only to them. (V.ii.e.5) #WealthOfTweets #SmithTweets

Some of the tax on house-rent is also paid by the owner of the ground-rent, but it's so hard to figure out how the burden will be split between the renters and the owners of ground-rent that not even Smith is gonna try. (V.ii.e.5) #WealthOfTweets #SmithTweets

That means taxes on house-rent are unequal.

That's bad. (V.ii.e.6) #WealthOfTweets #SmithTweets

BUT, a tax on house-rents probably, says Smith, falls most heavily on the rich and that's good. The rich should contribute more to public revenue because they can afford it. (V.ii.e.6) nymag.com/intelligencer/…
#WealthOfTweets #SmithTweets

House-rent is also different from regular land rent because regular land rent is revenue from a productive resource, while house-rent is revenue from a consumption good. (V.ii.e.7) #WealthOfTweets #SmithTweets

House-rent is really more like a consumption tax. It falls equally on whatever sorts of revenue inhabitants of the house use to pay for it.

(Smith will have lots to say about consumption taxes later. For now, we talk houses. Probably.) (V.ii.e.7) #WealthOfTweets #SmithTweets

That's how the burden of taxes falls on the people involved in housing. So how is the tax set?

Smith has thoughts. (V.ii.e.8–20) #WealthOfTweets #SmithTweets

First off, uninhabited houses shouldn't be charged house-rent. Empty houses don't create revenue, and revenue is what should be taxed. (V.ii.e.8) #WealthOfTweets #SmithTweets

House-rent should NOT be based on the cost of the building. The revenue that houses generate is paid as the housing is used, not in proportion to the cost of building (building and improvement expenses could be spread out over generations). (V.ii.e.8) #WealthOfTweets #SmithTweets

Ground-rents are unusually well-suited to taxation.
1) The owner is a monopolist.
2) Ground-rent depends on the prosperity/administration of the city and should support it.
3) Taxing ground-rents shouldn't increase house-rents. (V.ii.e.10–11) #WealthOfTweets #SmithTweets

In spite of that, Smith can't find an example of a country trying to tax ground-rents. (V.ii.e.12) #WealthOfTweets #SmithTweets

Assessing the value of homes is complicated. England has tried to base it on the number of hearths in the house or on the number of windows. Letting someone into your house to count hearths is onerous and oppressive. So that's out. (V.ii.e.16) #WealthOfTweets #SmithTweets

Counting windows is better (you can do it from the street), but it is unequal because of the differences in the ground-rent. A country house with 20 windows might be let for less than a city-house with ten. (V.ii.e.18–19) #WealthOfTweets #SmithTweets

So it's hard to set these taxes well. But regardless how they're set, they lower the rent of houses, says Smith (renters have a budget and lump taxes and rent together). (V.ii.e.20) #WealthOfTweets #SmithTweets

The fact that the rent of houses has risen over time in spite of the taxes is more proof of British prosperity. (V.ii.e.20) #WealthOfTweets #SmithTweets

And that's all Smith has to say about taxes on rent! Come back tomorrow for the exciting world of taxes on profit! #WealthOfTweets #SmithTweets

@HouseBudgets, we love your work.