34 EIGHTEENTH REPORT. 



marginal land would obviously be placed by users of those buildings, 

 and if they refuse to pay, the land will be devoted to some other 

 use. But land that is marginal for some specific use is not neces- 

 sarily no rent land, or even land without a site- rent. Before a 

 site becomes even worthy of consideration for the purpose of erect- 

 ing a bank or an office building it must have a pretty high site value 

 for other purposes. The more valuable the site for the purpose for 

 which it is used, the less will taxation affect the building, and in 

 cases where the site is much more valuable for that purpose than 

 for any other it may be that all the taxes on the property fall on 

 the site and the building may go scot-free. It may be, for example, 

 that a piece of land is well situated for a moving-picture theater, 

 and will earn a much better rent for this than for any other pur- 

 pose. Its selling price will be somewhere between its value for 

 some other use and the value obtainable bj^ capitalizing all the 

 profits of the theatre after deducting necessary expenses, includ- 

 ing taxes. Which extreme of this range becomes the actual selling 

 price will depend on whether the demand of would-be theatre own- 

 ers is greater or less than the supply of available sites. 



Now it would be easy to say, off-hand, that the incidence of a 

 tax on moving picture theatres would be on the theatre-owner or on 

 the public, if the demand is greater than the supply of suitable 

 sites, and on the land-owners in the opposite case. This conclu- 

 sion, apparently so simple and certain, is absolutely contrary to 

 the facts. If the demand exceeds the supply the actual price will 

 be fixed by the marginal demand price and the first extra-marginal 

 demand price. A tax will cut down both of these and thus re- 

 duce the price, so in this case the tax falls on the site. 



On the other hand if the supply of suitable sites exceeds the de- 

 mand, the selling price is fixed by the marginal and first extra- 

 marginal sellers' prices and there is nothing in the tax to make 

 them change their estimates and accept less than if there were no 

 tax. Hence the tax must be borne by the theatre-managers or the 

 theatre going public. 



Incidentally it may be remarked that this same line of argument 

 applies to the incidence of increment taxes. One of the commonest 

 statements as to the incidence of these is tliat when the demand 

 for the land is great the incidence will be on the purchaser; when 

 the demand is not so great the tax will fall on the seller. But if the 

 demand is great, that is what determines the price, and a tax on 

 increment, collected as it is from the seller, cannot increase the 



