THE INCIDENCE OF TAXES 117 



borne by the tenants ; that is to say, if there were no tax they 

 would get their houses cheaper by the precise amount of the 

 tax, because rents so diminished would suffice to induce specu- 

 lative builders to supply them. The rents through the whole 

 town are ruled by those of the new districts. There is a certain 

 relative value between every house in the town, and if the rents 

 of new houses are dearer, the rents of the old houses are in- 

 creased in due proportion. In fact, when new houses need to 

 be supplied year by year, houses are commodities which are 

 being produced, and the tax falls on the consumers. 



The above principles determine the incidence of a tax, 

 whether nominally levied on the landlord or tenant, but in their 

 application account must be taken of the mental inertia of both 

 landlords and tenants, as well as of the fact that many contracts 

 for houses are not immediately terminable. These two condi- 

 tions will for the first few years after the imposition of any 

 new tax cause it to fall on the party from whom it is nominally 

 levied. 



Precisely as a tax on trade not only falls on the traders, but 

 injures capitalists and labourers, a tax on house rents injures 

 the capitalists who build houses and the labourers they employ 

 not that the capitalist pays the tax, but he is prevented from 

 finding a useful investment for his money owing to the diminu- 

 tion in the number or quality of houses required, 



Taxes on Land. 



The question of the incidence of taxes on land is peculiarly 

 interesting. Land differs from all other commodities, inasmuch 

 as the quantity of it does not depend on the will of any producer. 

 The number of houses in a flourishing community does depend 

 on the will of speculative builders ; but land can only be in- 

 creased in quantity by such processes as enclosing commons, or 

 breaking up private pleasure grounds. We will neglect these 

 small disturbing influences, and assume that all the land in a 

 country is available for cultivation, where such cultivation is 

 profitable ; and that the absence of profit is the only reason for 

 neglecting to cultivate any portion of it. 



It is well known that the rent of each acre of 



