of Edinburgh, Session 1871 - 72 . 
627 
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 considerable 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 some¬ 
what 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 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 speculative 
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 increased 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 
