u6 POLITICAL ECONOMY 



on the part of the landlord. This permanency alters the incidence 

 of taxation. 



If the demand falls off the landlord cannot remove his house 

 he cannot cease to produce his house-year, which therefore he 

 must dispose of. Hence, in a stationary or declining community, 

 where no new houses are being built, but where year after year 

 a sensible proportion remains unoccupied, the landlord must sell 

 his house-year unreservedly, and any tax imposed on house rent 

 would fall on him alone ; that is to say, he would receive a rent 

 diminished by the full amount of the tax, and the tenant would 

 pay no more rent for a house of a given class than if no tax 

 were imposed. The supply curve becomes a straight horizontal 

 line, and is unaffected by the tax ; the demand curve is equally 

 unaffected by the tax ; the number of houses let is unaltered by 

 the tax, but the landlords lose as rent the whole amount raised 

 by taxation. 



This reasoning is based on the assumption that the supply 

 curve has become a straight horizontal line unaffected by the 

 tax. This condition is altered in any prosperous or growing 

 community. There new houses must be built, and a consider- 

 able number of houses are always unlet, not because they are 

 not required by the community, but because the speculative 

 builders are holding out for higher terms. This produces a 

 supply curve of the kind common to all other kinds of goods. 

 At higher prices more goods are forthcoming. A newly-imposed 

 tax will then be distributed between sellers and buyers, landlords 

 and tenants in a manner depending on the form of these curves. 

 A sensible check will be given to the letting of houses, tenants 

 will be content with somewhat less good houses, and landlords 

 with rather smaller rents. This is the immediate effect of the 

 tax the greater portion would probably fall on the landlords 

 at first, at least in the new houses where fresh contracts are 

 being made. But after a few years the conditions would have 

 altered. New houses are only built because the builders obtain 

 the usual trade profit and interest on their capital the check 

 to letting consequent" on the imposition of the tax will therefore 

 diminish the supply of new houses until, owing to diminution 

 in supply, rents have risen to their old average. Then builders 

 resume their operations. The whole tax by that time will be 



