is a tax of this kind. During the Mahometan 
government of Bengal, instead of the 
payment in kind of the fifth part of the produce, 
a modus, and, it is said, a very moderate 
one, was established in the greater part 
of the districts or zemindaries of the country
Some of the servants of the East India company, 
under pretence of restoring the public 
revenue to its proper value, have, in some 
provinces, exchanged this modus for a payment 
in kind. Under their management, 
this change is likely both to discourage cultivation
and to give new opportunities for 
abuse in the collection of the public revenue, 
which has fallen very much below what it 
was said to have been when it first fell under 
the management of the company. The servants 
of the company may, perhaps, have 
profited by the change, but at the expense, it 
is probable, both of their masters and of the 
Taxes upon the Rent of Houses
The rent of a house may be distinguished 
into two parts, of which the one may very 
properly be called the building-rent; the 
other is commonly called the ground-rent
The building-rent is the interest or profit 
of the capital expended in building the house
In order to put the trade of a builder upon a 
level with other trades, it is necessary that 
this rent should be sufficient, first, to pay him 
the same interest which he would have got 
for his capital, if he had lent it upon good 
security; and, secondly, to keep the house in 
constant repair, or, what comes to the same 
thing, to replace, within a certain term of 
years, the capital which had been employed 
in building it. The building-rent, or the 
ordinary profit of building, is, therefore, 
everywhere regulated by the ordinary interest 
of money. Where the market rate of interest 
is four per cent. the rent of a house, which, 
over and above paying the ground-rent, affords 
six or six and a-half per cent. upon the 
whole expense of building, may, perhaps, 
afford a sufficient profit to the builder
Where the market rate of interest is five per 
cent. it may perhaps require seven or seven 
and a-half per cent. If, in proportion to the 
interest of money, the trade of the builders 
affords at any time much greater profit than 
this, it will soon draw so much capital from 
other trades as will reduce the profit to its 
proper level. If it affords at any time much 
less than this, other trades will soon draw so 
much capital from it as will again raise that 
Whatever part of the whole rent of a house 
is over and above what is sufficient for affording 
this reasonable profit, naturally goes to 
the ground-rent; and, where the owner of 
the ground and the owner of the building are 
two different persons, is, in most cases, completely 
paid to the former. This surplus rent 
is the price which the inhabitant of the house 
pays for some real or supposed advantage of 
the situation. In country houses, at a distance 
from any great town, where there is 
plenty of ground to chuse upon, the ground-rent 
is scarce any thing, or no more than 
what the ground which the house stands upon 
would pay, if employed in agriculture. In 
country villas, in the neighbourhood of some 
great town, it is sometimes a good deal higher
and the peculiar conveniency or beauty 
of situation is there frequently very well paid 
for. Ground-rents are generally highest in 
the capital, and in those particular parts of it 
where there happens to be the greatest demand 
for houses, whatever be the reason of 
that demand, whether for trade and business
for pleasure and society, or for mere vanity 
and fashion. 
A tax upon house-rent, payable by the tenant
and proportioned to the whole rent of 
each house, could not, for any considerable 
time at least, affect the building-rent. If the 
builder did not get his reasonable profit, he 
would be obliged to quit the trade; which, 
by raising the demand for building, would, 
in a short time, bring back his profit to its proper 
level with that of other trades. Neither 
would such a tax fall altogether upon the 
ground-rent; but it would divide itself in 
such a manner, as to fall partly upon the inhabitant 
of the house, and partly upon the 
owner of the ground
Let us suppose, for example, that a particular 
person judges that he can afford for 
house-rent an expense of sixty pounds a-year
and let us suppose, too, that a tax of four 
shillings in the pound, or of one-fifth, payable 
by the inhabitant, is laid upon house-rent
A house of sixty pounds rent will, in that 
case, cost him seventy-two pounds a-year
which is twelve pounds more than he thinks 
he can afford. He will, therefore, content 
himself with a worse house, or a house of 
fifty pounds rent, which, with the additional 
ten pounds that he must pay for the tax, will 
make up the sum of sixty pounds a-year
the expense which he judges he can afford, 
and, in order to pay the tax, he will give up 
a part of the additional conveniency which he 
might have had from a house of ten pounds 
a-year more rent. He will give up, I say, a 
part of this additional conveniency; for he 
will seldom be obliged to give up the whole, 
but will, in consequence of the tax, get a better 
house for fifty pounds a-year, than he 
could have got if there had been no tax
For as a tax of this kind, by taking away 
this particular competitor, must diminish the 
competition for houses of sixty pounds rent
so it must likewise diminish it for those of 
fifty pounds rent, and in the same manner for 
those of all other rents, except the lowest