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)…
#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.

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More from @adamsmithworks

2 Mar
Having said what he had to say about taxes on rent and profits, #AdamSmith pauses, now, for an appendix to handle the taxation of the land and stock that generate rent and profit. (V.ii.h) #WealthOfTweets #SmithTweets
Dear readers, we hope you are tax nerds. (We still and forever ❤ you, nerds.) @turbotax @IRSnews @HRBlock (V.ii.h) #WealthOfTweets #SmithTweets
Taxing the revenue generated by land or stock doesn't diminish the ability of that land or stock to generate revenue. But taxing away a portion of the revenue-generating property does. (V.ii.h.1) #WealthOfTweets #SmithTweets
Read 22 tweets
1 Mar
#AdamSmith's thoughts on taxation: They are numerous, and outlined in detail in #WealthOfNations. Today we'll be looking at taxes on profit! (V.ii.f–g) #WealthOfTweets #SmithTweets
Smith starts out by reminding us that profits are divided into the part that pays the interest and the part over and above that which pays the interest.

You can't tax the over-and-above part directly. (V.ii.f.1–2) #WealthOfTweets #SmithTweets
Over-and-above paying the interest might sound like it's extra money, but it's not! It compensates the owner of stock for things like risk and trouble. If you tax away this profit, the owner of the stock won't employ it productively. (V.ii.f.2) #WealthOfTweets #SmithTweets
Read 28 tweets
27 Feb
It's here! It's finally here! The (first) day #AdamSmith talks about taxes in #WealthOfNations!

We're assuming there's a group for whom this is exciting. We, the SmithTweeters, may not count ourselves among them. But let's go anyway! (V.ii.b) #WealthOfTweets #SmithTweets
Remember how Smith divided private revenue into rent, profit, and wages in the first book? Now he's gonna divide up taxes. Smith loves a good subdivision. Taxes can fall on:
1) Rent
2) Profits
3) Wages
4) All three indifferently. (V.ii.b.1) #WealthOfTweets #SmithTweets
He'll be dividing up three of these into further subdivisions, obvs. (V.ii.b.1) #WealthOfTweets #SmithTweets
Read 27 tweets
26 Feb
Now you know all the things #AdamSmith has to say about what the government should spend money on. But that money's gotta come from somewhere. What does #WealthOfNations say about how governments should get money to spend? (V.ii.) #WealthOfTweets #SmithTweets
I know the tax nerds have been waiting for this chapter (we ❤ you, nerds), but first Smith wants to talk about other sources of revenue "which may peculiarly belong to the Sovereign or Commonwealth". (V.ii.a) #WealthOfTweets #SmithTweets
IOW, before we get to taxes we've gotta cover businesses run by the sovereign (like the post office), public banks, public lending, and revenue from public lands.

But don't worry, we can do that pretty quickly...ish. (V.ii.a) #WealthOfTweets #SmithTweets
Read 17 tweets
25 Feb
Sovereigns are fancy, and they need revenue to support their fanciness. This is the entirety of part four of this chapter. (V.i.h.1–3) #WealthOfTweets #SmithTweets
In conclusion, all these expenses in Book V Chapter 1—defense, justice, public works, education, religion, fancy sovereigns—are for the benefit of society as a whole so society should help pay for them. (V.i.i.1–6) #WealthOfTweets #SmithTweets
When possible, it is good to find ways to make these things also help pay for themselves, though. You can’t ever expect them to cover all those costs, though. (V.i.i.1–6) #WealthOfTweets #SmithTweets
Read 4 tweets
24 Feb
#AdamSmith isn’t just interested in educating kids. He knows we need #LifeLongLearning and #AdultEducation.
He doesn't mean university courses for adults, but rather “preparation for a better world to come.” (He means church.) (V.i.g.1) #WealthOfTweets #SmithTweets
So we need to know how to best fund the clergy who provide this kind of education. Direct payments from their hearers? Tax? Tithe? Salary? (V.i.g.1) #WealthOfTweets #SmithTweets
Just as with other educators, clergy will be more zealous and hard working when they are paid directly by hearers rather than being guaranteed an income. This is why newer religions are so lively. (V.i.g.1) #WealthOfTweets #SmithTweets
Read 33 tweets

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