The Principles of Political Economy
by John Stuart Mill

Book 5

Chapter 3

Of Direct Taxes

    1. Taxes are either direct or indirect. A direct tax is one
which is demanded from the very persons who, it is intended or
desired, should pay it. Indirect taxes are those which are
demanded from one person in the expectation and intention that he
shall indemnify himself at the expense of another: such as the
excise or customs. The producer or importer of a commodity is
called upon to pay a tax on it, not with the intention to levy a
peculiar contribution upon him, but to tax through him the
consumers of the commodity, from whom it is supposed that he will
recover the amount by means of an advance in price. Direct taxes
are either on income, or on expenditure. Most taxes on
expenditure are indirect, but some are direct, being imposed not
on the producer or seller of an article, but immediately on the
consumer. A house-tax, for example, is a direct tax on
expenditure, if levied, as it usually is, on the occupier of the
house. If levied on the builder or owner, it would be an indirect
tax. A window-tax is a direct tax on expenditure; so are the
taxes on horses and carriages, and the rest of what are called
the assessed taxes. 
    The sources of income are rent, profits, and wages. This
includes every sort of income, except gift or plunder. Taxes may
be laid on any one of the three kinds of income, or an uniform
tax on all of them. We will consider these in their order. 

    2. A tax on rent falls wholly on the landlord. There are no
means by which he can shift the burthen upon any one else. It
does not affect the value or price of agricultural produce, for
this is determined by the cost of production in the most
unfavourable circumstances, and in those circumstances, as we
have so often demonstrated, no rent is paid. A tax on rent,
therefore, has no effect, other than its obvious one. It merely
takes so much from the landlord, and transfers it to the state. 
    This, however, is, in strict exactness, only true of the rent
which is the result either of natural causes, or of improvements
made by tenants. When the landlord makes improvements which
increase the productive power of his land, he is remunerated for
them by an extra payment from the tenant; and this payment, which
to the landlord is properly a profit on capital, is blended and
confounded with rent; which indeed it really is, to the tenant,
and in respect of the economical laws which determine its amount.
A tax on rent, if extending to this portion of it, would
discourage landlords from making improvements: but it does not
follow that it would raise the price of agricultural produce. The
same improvements might be made with the tenant's capital, or
even with the landlord's if lent by him to the tenant; provided
he is willing to give the tenant so long a lease as will enable
him to indemnify himself before it expires. But whatever hinders
improvements from being made in the manner in which people prefer
to make them, will often prevent them from being made at all: and
on this account a tax on rent would be inexpedient, unless some
means could be devised of excluding from its operation that
portion of the nominal rent which may be regarded as landlord's
profit. This argument, however, is not needed for the
condemnation of such a tax. A peculiar tax on the income of any
class, not balanced by taxes on other classes, is a violation of
justice, and amounts to a partial confiscation. I have already
shown grounds for excepting from this censure a tax which,
sparing existing rents, should content itself with appropriating
a portion of any future increase arising from the mere action of
natural causes. But even this could not be justly done, without
offering as an alternative the market price of the land. In the
case of a tax on rent which is not peculiar, but accompanied by
an equivalent tax on other incomes, the objection grounded on its
reaching the profit arising from improvements is less applicable:
since, profits being taxed as well as rent, the profit which
assumes the form of rent is liable to its share in common with
other profits; but since profits altogether ought, for reasons
formerly stated, to be taxed somewhat lower than rent properly so
called, the objection is only diminished, not removed. 

    3. A tax on profits, like a tax on rent, must, at least in
its immediate operation, fall wholly on the payer. All profits
being alike affected, no relief can be obtained by a change of
employment. If a tax were laid on the profits of any one branch
of productive employment, the tax would be virtually an increase
of the cost of production, and the value and price of the article
would rise accordingly; by which the tax would be thrown upon the
consumers of the commodity, and would not affect profits. But a
general and equal tax on all profits would not affect general
prices, and would fall, at least in the first instance, on
capitalists alone. 
    There is, however, an ulterior effect, which, in a rich and
prosperous country, requires to be taken into account. When the
capital accumulated is so great and the rate of annual
accumulation so rapid, that the country is only kept from
attaining the stationary state by the emigration of capital, or
by continual improvements in production; any circumstance which
virtually lowers the rate of profit cannot be without a decided
influence on these phenomena. It may operate in different ways.
The curtailment of profit, and the consequent increased
difficulty in making a fortune or obtaining a subsistence by the
employment of capital, may act as a stimulus to inventions, and
to the use of them when made. If improvements in production are
much accelerated, and if these improvements cheapen, directly or
indirectly, any of the things habitually consumed by the
labourer, profits may rise, and rise sufficiently to make up for
all that is taken from them by the tax. In that case the tax will
have been realized without loss to any one, the produce of the
country being increased by an equal, or what would in that case
be a far greater amount. The tax, however, must even in this case
be considered as paid from profits, because the receivers of
profits are those who would be benefited if it were taken off. 
    But though the artificial abstraction of a portion of profits
would have a real tendency to accelerate improvements in
production, no considerable improvements might actually result,
or only of such a kind as not to raise general profits at all, or
not to raise them so much as the tax had diminished them. If so,
the rate of profit would be brought closer to that practical
minimum, to which it is constantly approaching: and this
diminished return to capital would either give a decided check to
further accumulation, or would cause a greater proportion than
before of the annual increase to be sent abroad, or wasted in
unprofitable speculations. At its first imposition the tax falls
wholly on profits: but the amount of increase of capital, which
the tax prevents, would, if it had been allowed to continue, have
tended to reduce profits to the same level; and at every period
of ten or twenty years there will be found less difference
between profits as they are, and profits as they would in that
case have been: until at last there is no difference, and the tax
is thrown either upon the labourer or upon the landlord. The real
effect of a tax on profits is to make the country possess at any
given period, a smaller capital and a smaller aggregate
production, and to make the stationary state be attained earlier,
and with a smaller sum of national wealth. It is possible that a
tax on profits might even diminish the existing capital of the
country. If the rate of profit is already at the practical
minimum, that is, at the point at which all that portion of the
annual increment which would tend to reduce profits is carried
off either by exportation or by speculation; then if a tax is
imposed which reduces profits still lower, the same causes which
previously carried off the increase would probably carry off a
portion of the existing capital. A tax on profits is thus, in a
state of capital and accumulation like that in England, extremely
detrimental to the national wealth. And this effect is not
confined to the case of a peculiar, and therefore intrinsically
unjust, tax on profits. The mere fact that profits have to bear
their share of a heavy general taxation, tends, in the same
manner as a peculiar tax, to drive capital abroad, to stimulate
imprudent speculations by diminishing safe gains, to discourage
further accumulation, and to accelerate the attainment of the
stationary state. This is thought to have been the principal
cause of the decline of Holland, or rather of her having ceased
to make progress. 
    Even in countries which do not accumulate so fast as to be
always within a short interval of the stationary state, it seems
impossible that, if capital is accumulating at all, its
accumulation should not be in some degree retarded by the
abstraction of a portion of its profit; and unless the effect in
stimulating improvements be a full counter-balance, it is
inevitable that a part of the burthen will be thrown off the
capitalist, upon the labourer or the landlord. One or other of
these is always the loser by a diminished rate of accumulation.
If population continues to increase as before, the labourer
suffers: if not, cultivation is checked in its advance, and the
landlords lose the accession of rent which would have accrued to
them. The only countries in which a tax on profits seems likely
to be permanently a burthen on capitalists exclusively, are those
in which capital is stationary, because there is no new
accumulation. In such countries the tax might not prevent the old
capital from being kept up through habit, or from unwillingness
to submit to impoverishment, and so the capitalist might continue
to bear the whole of the tax. It is seen from these
considerations that the effects of a tax on profits are much more
complex, more various, and in some points more uncertain, than
writers on this subject have commonly supposed. 

    4. We now turn to Taxes on Wages. The incidence of these is
very different, according as the wages taxed are those of
ordinary unskilled labour, or are the remuneration of such
skilled or privileged employments, whether manual or
intellectual, as are taken out of the sphere of competition by a
natural or conferred monopoly. 
    I have already remarked, that in the present low state of
popular education, all the higher grades of mental or educated
labour are at a monopoly price; exceeding the wages of common
workmen in a degree very far beyond that which is due to the
expense, trouble, and loss of time required in qualifying for the
employment. Any tax levied on these gains, which still leaves
them above (or not below) their just proportion, falls on those
who pay it; they have no means of relieving themselves at the
expense of any other class. The same thing is true of ordinary
wages, in cases like that of the United States, or of a new
colony, where, capital increasing as rapidly as population can
increase, wages are kept up by the increase of capital, and not
by the adherence of the labourers to a fixed standard of
comforts. In such a case some deterioration of their condition,
whether by a tax or otherwise, might possibly take place without
checking the increase of population. The tax would in that case
fall on the labourers themselves, and would reduce them
prematurely to that lower state to which, on the same supposition
with regard to their habits, they would in any case have been
reduced ultimately, by the inevitable diminution in the rate of
increase of capital, through the occupation of all the fertile
land. 
    Some will object that, even in this case, a tax on wages
cannot be detrimental to the labourers, since the money raised by
it, being expended in the country, comes back to the labourers
again through the demand for labour. The fallacy, however, of
this doctrine has been so completely exhibited in the First Book,
that I need do little more than refer to that exposition. It was
there shown that funds expended unproductively have no tendency
to raise or keep up wages, unless when expended in the direct
purchase of labour. If the government took a tax of a shilling a
week from every labourer, and laid it all out in hiring labourers
for military service, public works, or the like, it would, no
doubt, indemnify the labourers as a class for all that the tax
took from them. That would really be 'spending the money among
the people'. But if it expended the whole in buying goods, or in
adding to the salaries of employes who bought goods with it, this
would not increase the demand for labour, or tend to raise wages.
Without, however, reverting to general principles, we may rely on
an obvious reductio ad absurdum. If to take money from the
labourers and spend it in commodities is giving it back to the
labourers, then, to take money from other classes, and spend it
in the same manner, must be giving it to the labourers;
consequently, the more a government takes in taxes, the greater
will be the demand for labour, and the more opulent the condition
of the labourers. A proposition the absurdity of which no one can
fail to see. 
    In the condition of most communities, wages are regulated by
the habitual standard of living to which the labourers adhere,
and on less than which they will not multiply. Where there exists
such a standard, a tax on wages will indeed for a time be borne
by the labourers themselves; but unless this temporary depression
has the effect of lowering the standard itself, the increase of
population will receive a check, which will raise wages, and
restore the labourers to their previous condition. On whom, in
this case, will the tax fall? According to Adam Smith, on the
community generally, in their character of consumers; since the
rise of wages, he thought, would raise general prices. We have
seen, however, that general prices depend on other causes, and
are never raised by any circumstance which affects all kinds of
productive employment in the same manner and degree. A rise of
wages occasioned by a tax, must, like any other increase of the
cost of labour, be defrayed from profits. To attempt to tax
day.labourers, in an old country, is merely to impose an extra
tax upon all employers of common labour; unless the tax has the
much worse effect of permanently lowering the standard of
comfortable subsistence in the minds of the poorest class. 
    We find in the preceding considerations an additional
argument for the opinion already expressed, that direct taxation
should stop short of the class of incomes which do not exceed
what is necessary for healthful existence. These very small
incomes are mostly derived from manual labour; and, as we now
see, any tax imposed on these, either permanently degrades the
habits of the labouring class, or falls on profits, and burthens
capitalists with an indirect tax, in addition to their share of
the direct taxes; which is doubly objectionable, both as a
violation of the fundamental rule of equality, and for the
reasons which, as already shown, render a peculiar tax on profits
detrimental to the public wealth, and consequently to the means
which society possesses of paying any taxes whatever. 

    5. We now pass, from taxes on the separate kinds of income,
to a tax attempted to be assessed fairly upon all kinds; in other
words, an Income Tax. The discussion of the conditions necessary
for making this tax consistent with justice, has been anticipated
in the last chapter. We shall suppose, therefore, that these
conditions are complied with. They are, first, that incomes below
a certain amount should be altogether untaxed. This minimum
should not be higher than the amount which suffices for the
necessaries of the existing population. The exemption from the
present income tax, of all incomes under 100 l. a year, and the
lower percentage formerly levied on those between 100 l. and 150
l., are only defensible on the ground that almost all the
indirect taxes press more heavily on incomes between 50 l. and
150 l. than on any others whatever. The second condition is, that
incomes above the limit should be taxed only in proportion to the
surplus by which they exceed the limit. Thirdly, that all sums
saved from income and invested, should be exempt from the tax: or
if this be found impracticable, that life incomes, and incomes
from business and professions, should be less heavily taxed than
inheritable incomes, in a degree as nearly as possible equivalent
to the increased need of economy arising from their terminable
character: allowance being also made, in the case of variable
incomes, for their precariousness. 
    An income-tax, fairly assessed on these principles, would be,
in point of justice, the least exceptionable of all taxes. The
objection to it, in the present low state of public morality, is
the impossibility of ascertaining the real incomes of the
contributors. The supposed hardship of compelling people to
disclose the amount of their incomes, ought not, in my opinion,
to count for much. One of the social evils of this country is the
practice, amounting to a custom, of maintaining, or attempting to
maintain, the appearance to the world of a larger income than is
possessed; and it would be far better for the interest of those
who yield to this weakness, if the extent of their means were
universally and exactly known, and the temptation removed to
expending more than they can afford, or stinting real wants in
order to make a false show externally. At the same time, the
reason of the case, even on this point, is not so exclusively on
one side of the argument as is sometimes supposed. So long as the
vulgar of any country are in the debased state of mind which this
national habit presupposes - so long as their respect (if such a
word can be applied to it) is proportioned to what they suppose
to be each person's pecuniary means - it may be doubted whether
anything which would remove all uncertainty as to that point,
would not considerably increase the presumption and arrogance of
the vulgar rich, and their insolence towards those above them in
mind and character, but below them in fortune. 
    Notwithstanding, too, what is called the inquisitorial nature
of the tax, no amount of inquisitorial power which would be
tolerated by a people the most disposed to submit to it, could
enable the revenue officers to assess the tax from actual
knowledge of the circumstances of contributors. Rent, salaries,
annuities, and all fixed incomes, can be exactly ascertained. But
the variable gains of professions, and still more the profits of
business, which the person interested cannot always himself
exactly ascertain, can still less be estimated with any approach
to fairness by a tax-collector. The main reliance must be placed,
and always has been placed, on the returns made by the person
himself. No production of accounts is of much avail, except
against the more flagrant cases of falsehood; and even against
these the check is very imperfect, for if fraud is intended,
false accounts can generally be framed which it will baffle any
means of inquiry possessed by the revenue officers to detect: the
easy re. source of omitting entries on the credit side being
often sufficient without the aid of fictitious debts or
disbursements. The tax, therefore, on whatever principles of
equality it may be imposed, is in practice unequal in one of the
worst ways, falling heaviest on the most conscientious. The
unscrupulous succeed in evading a great proportion of what they
should pay; even persons of integrity in their ordinary
transactions are tempted to palter with their consciences, at
least to the extent of deciding in their own favour all points on
which the smallest doubt or discussion could arise: while the
strictly veracious may be made to pay more than the state
intended, by the powers of arbitrary assessment necessarily
intrusted to the Commssioners, as the last defence against the
tax-payer's power of concealment. 
    It is to be feared, therefore, that the fairness which
belongs to the principle of an income tax, cannot be made to
attach to it in practice: and that this tax, while apparently the
most just of all modes of raising a revenue, is in effect more
unjust than many others which are prima facie more objectionable.
This consideration would lead us to concur in the opinion which,
until of late, has usually prevailed - that direct taxes on
income should be reserved as an extraordinary resource for great
national emergencies, in which the necessity of a large
additional revenue overrules all objections. 
    The difficulties of a fair income tax have elicited a
proposition for a direct tax of so much per cent, not on income
but on expenditure; the aggregate amount of each person's
expenditure being ascertained, as the amount of income now is,
from statements furnished by the contributors themselves. The
author of this suggestion, Mr Revans, in a clever pamphlet on the
subject,(1*) contends that the returns which persons would
furnish of their expenditure would be more trustworthy than those
which they now make of their income, inasmuch as expenditure is
in its own nature more public than income, and false
representations of it more easily detected. He cannot, I think,
have sufficiently considered, how few of the items in the annual
expenditure of most families can be judged of with any
approximation to correctness from the external signs. The only
security would still be the veracity of individuals, and there is
no reason for supposing that their statements would be more
trustworthy on the subject of their expenses than that of their
revenues; especially as, the expenditure of most persons being
composed of many more items than their income, there would be
more scope for concealment and suppression in the detail of
expenses than even of receipts. 
    The taxes on expenditure at present in force, either in this
or in other countries, fall only on particular kinds of
expenditure, and differ no otherwise from taxes on commodities
than in being paid directly by the person who consumes or uses
the article, instead of being advanced by the producer or seller,
and reimbursed in the price. The taxes on horses and carriages,
on dogs, on servants, are all of this nature. They evidently fall
on the persons from whom they are levied - those who use the
commodity taxed. A tax of a similar description, and more
important, is a house-tax; which must be considered at somewhat
greater length. 

    6. The rent of a house consists of two parts, the
ground-rent, and what Adam Smith calls the building-rent. The
first is determined by the ordinary principles of rent. It is the
remuneration given for the use of the portion of land occupied by
the house and its appurtenances; and varies from a mere
equivalent for the rent which the ground would afford in
agriculture, to the monopoly rents paid for advantageous
situations in populous thoroughfares. The rent of the house
itself, as distinguished from the ground, is the equivalent given
for the labour and capital expended on the building. The fact of
its being received in quarterly or half.yearly payments, makes no
difference in the principles by which it is regulated. It
comprises the ordinary profit on the builder's capital, and an
annuity, sufficient at the current rate of interest, after paying
for all repairs chargeable on the proprietor, to replace the
original capital by the time the house is worn out, or by the
expiration of the usual term of a building lease. 
    A tax of so much per cent on the gross rent, falls on both
those portions alike. The more highly a house is rented, the more
it pays to the tax, whether the quality of the situation or that
of the house itself is the cause. The incidence, however, of
these two portions of the tax must be considered separately. 
    As much of it as is a tax on building-rent, must ultimately
fall on the consumer, in other words the occupier. For as the
profits of building are already not above the ordinary rate, they
would, if the tax fell on the owner and not on the occupier,
become lower than the profits of untaxed employments, and houses
would not be built. It is probable however that for some time
after the tax was first imposed, a great part of it would fall,
not on the renter, but on the owner of the house. A large
proportion of the consumers either could not afford, or would not
choose, to pay their former rent with the tax in addition, but
would content themselves with a lower scale of accommodation.
Houses therefore would be for a time in excess of the demand. The
consequence of such excess, in the case of most other articles,
would be an almost immediate diminution of the supply: but so
durable a commodity as houses does not rapidly diminish in
amount. New buildings indeed, of the class for which the demand
had decreased, would cease to be erected, except for special
reasons; but in the meantime the temporary superfluity would
lower rents, and the consumers would obtain perhaps nearly the
same accommodation as formerly, for the same aggregate payment,
rent and tax together. By degrees, however, as the existing
houses wore out, or as increase of population demanded a greater
supply, rents would again rise; until it became profitable to
recommence building, which would not be until the tax was wholly
transferred to the occupier. In the end, therefore, the occupier
bears that portion of a tax on rent, which falls on the payment
made for the house itself, exclusively of the ground it stands
on. 
    The case is partly different with the portion which is a tax
on ground-rent. As taxes on rent, properly so called, fall on the
landlord, a tax on ground-rent, one would suppose, must fall on
the ground-landlord, at least after the expiration of the
building lease. It will not however fall wholly on the landlord,
unless with the tax on ground-rent there is combined an
equivalent tax on agricultural rent. The lowest rent of land let
for building is very little above the rent which the same ground
would yield in agriculture: since it is reasonable to suppose
that land, unless in case of exceptional circumstances, is let or
sold for building as soon as it is decidedly worth more for that
purpose than for cultivation. If, therefore, a tax were laid on
ground-rents without being also laid on agricultural rents, it
would, unless of trifling amount, reduce the return from the
lowest ground-rents below the ordinary return from land, and
would check further building quite as effectually as if it were a
tax on building-rents, until either the increased demand of a
growing population, or a diminution of supply by the ordinary
causes of destruction, had raised the rent by a full equivalent
for the tax. But whatever raises the lowest ground-rents, raises
all others, since each exceeds the lowest by the market value of
its peculiar advantages. If, therefore, the tax on ground-rents
were a fixed sum per square foot, the more valuable situations
paying no more than those least in request, this fixed payment
would ultimately fall on the occupier. Suppose the lowest
ground-rent to be 10 l. per acre, and the highest 1000 l., a tax
of 1l. per acre on ground-rents would ultimately raise the former
to 11 l., and the latter consequently to 1001 l., since the
difference of value between the two situations would be exactly
what it was before: the annual pound, therefore, would be paid by
the occupier. But a tax on ground-rent is supposed to be a
portion of a house-tax, which is not a fixed payment, but a
percentage on the rent. The cheapest site, therefore, being
supposed as before to pay 1 l., the dearest would pay 100 l., of
which only the 1 l. could be thrown upon the occupier, since the
rent would still be only raised to 100 l. Consequently, 99 l. of
the 100 l. levied from the expensive site, would fall on the
ground-landlord. A house-tax thus requires to be considered in a
double aspect, as a tax on all occupiers of houses, and a tax on
ground-rents. 
    In the vast majority of houses, the ground-rent forms but a
small proportion of the annual payment made for the house, and
nearly all the tax falls on the occupier. It is only in
exceptional cases, like that of the favourite situations in large
towns, that the predominant element in the rent of the house is
the ground-rent; and among the very few kinds of income which are
fit subjects for peculiar taxation, these ground-rents hold the
principal place, being the most gigantic example extant of
enormous accessions of riches acquired rapidly, and in many cases
unexpectedly, by a few families, from the mere accident of their
possessing certain tracts of land, without their having
themselves aided in the acquisition by the smallest exertion,
outlay, or risk. So far therefore as a house-tax falls on the
ground-landlord, it is liable to no valid objection. 
    In so far as it falls on the occupier, if justly proportioned
to the value of the house, it is one of the fairest and most
unobjectionable of all taxes. No part of a person's expenditure
is a better criterion of his means, or bears, on the whole, more
nearly the same proportion to them. A house-tax is a nearer
approach to a fair income tax, than a direct assessment on income
can easily be; having the great advantage, that it makes
spontaneously all the allowances which it is so difficult to
make, and so impracticable to make exactly, in assessing an
income tax: for if what a person pays in house-rent is a test of
anything, it is a test not of what he possesses, but of what he
thinks he can afford to spend. The equality of this tax can only
be seriously questioned on two grounds. The first is, that a
miser may escape it. This objection applies to all taxes on
expenditure: nothing but a direct tax on income can reach a
miser. But as misers do not now hoard their treasure, but invest
it in productive employments, it not only adds to the national
wealth, and consequently to the general means of paying taxes,
but the payment claimable from itself is only transferred from
the principal sum to the income afterwards derived from it, which
pays taxes as soon as it comes to be expended. The second
objection is, that a person may require a larger and more
expensive house, not from having greater means, but from having a
larger family. Of this, however, he is not entitled to complain;
since having a large family is at a person's own choice: and, so
far as concerns the public interest, is a thing rather to be
discouraged than promoted.(2*) A large portion of the taxation of
this country is raised by a house-tax. The parochial taxation of
the towns entirely, and of the rural districts partially,
consists of an assessment on house-rent. The window-tax, which
was also a house-tax, but of a bad kind, operating as a tax on
light, and a cause of deformity in building, was exchanged in
1851 for a house-tax properly so called, but on a much lower
scale than that which existed previously to 1834. It is to be
lamented that the new tax retains the unjust principle on which
the old house-tax was assessed, and which contributed quite as
much as the selfishness of the middle classes to produce the
outcry against the tax. The public were justly scandalized on
learning that residences like Chatsworth or Belvoir were only
rated on an imaginary rent of perhaps 200 l. a year, under the
pretext that owing to the great expense of keeping them up, they
could not be let for more. Probably, indeed, they could not be
let even for that, and if the argument were a fair one, they
ought not to have been taxed at all. But a house. tax is not
intended as a tax on incomes derived from houses, but on
expenditure incurred for them. The thing which it is wished to
ascertain is what a house costs to the person who lives in it,
not what it would bring in if let to some one else. When the
occupier is not the owner, and does not hold on a repairing
lease, the rent he pays is the measure of what the house costs
him: but when he is the owner, some other measure must be sought.
A valuation should be made of the house, not at what it would
sell for, but at what would be the cost of rebuilding it, and
this valuation might be periodically corrected by an allowance
for what it had lost in value by time, or gained by repairs and
improvements. The amount of the amended valuation would form a
principal sum, the interest of which, at the current price of the
public funds, would form the annual value at which the building
should be assessed to the tax.
    As incomes below a certain amount ought to be exempt from
income tax, so ought houses below a certain value, from
house-tax, on the universal principle of sparing from all
taxation the absolute necessaries of healthful existence. In
order that the occupiers of lodgings, as well as of houses, might
benefit, as in justice they ought, by this exemption, it might be
optional with the owners to have every portion of a house which
is occupied by a separate tenant, valued and assessed separately,
as is now usually the case with chambers. 

NOTES:

1. 'A Percentage Tax on Domestic Expenditure to supply the whole
of the Public Revenue.' By John Revans. Published by Hatchard, in
1847.

2. Another common objection is that large and expensive
accommodation is often required, not as a residence, but for
business. But it is an admitted principle that buildings or
portions of buildings occupied exclusively for business, such as
shops, warehouses, or manufactories, ought to be exempted from
house-tax. The plea that persons in business may be compelled to
live in situations, such as the great thoroughfares of London,
where house-rent is at a monopoly rate, seems to me unworthy of
regard: since no one does so but because the extra profit which
he expects to derive from the situation, is more than an
equivalent to him for the extra cost. But in any case, the bulk
of the tax on this extra rent will not fall on him, but on the
ground-landlord. 
    It has been also objected that house-rent in the rural
districts is much lower than in towns, and lower in some towns
and in some rural districts than in others: so that a tax
proportioned to it would have a corresponding inequality of
pressure. To this, however, it may be answered, that in places
where house-rent is low, persons of the same amount of income
usually live in larger and better houses, and thus expend in
house-rent more nearly the same proportion of their incomes than
might at first sight appear. Or if not, the probability will be,
that many of them live in those places precisely because they are
too poor to live elsewhere, and have therefore the strongest
claim to be taxed lightly. In some cases, it is precisely because
the people are poor, that house-rent remains low.