Re: Smith: ground rents and land rents
- From: royls@xxxxxxxxx
- Date: 23 Aug 2005 20:35:29 -0700
On 19 Aug 2005 09:45:55 -0700, "ruetheday@xxxxxxxxxx"
<ruetheday@xxxxxxxxxx> wrote:
>>>"Ground rent" means the land rent. The "ordinary rent of land" means
>>>rent in the vernacular sense which includes improvements.
>
>>IMO the ordinary rent of land would be rent received from tenants in
>>return for use of the land net of improvements, while ground rent is
>>the economic rent of the land, which can also be captured by the owner
>>directly -- e.g., a plantation owner can collect the ground rent by
>>employing an overseer to run his plantation rather than letting the
>>land to tenants.
>
>I don't believe that to be correct, at least not in the context of
>Smith's usage.
>
>---------------------------------------------------------------------------------
>
>>>From Wealth Of Nations:
>
>Book 5 Chapter 2
>"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.
So far so good...
>Ground-rents are a still more proper subject of taxation than the rent
>of houses. A tax upon ground-rents would not raise the rents of houses.
>It would fall altogether upon the owner of the ground-rent, who acts
>always as a monopolist, and exacts the greatest rent which can be got
>for the use of his ground.
Give or take. Most landowners, like most monopolists, are too lazy to
exact all the rent they can. That's one reason many people claim
incorrectly that increased land taxes are passed on in increased rents:
the landowners can't be bothered extracting every last dime in rent;
but an increase in assessed land value and thus land tax amount is
their cue that their land's rent has increased, so they can confidently
increase the rents they charge their tenants without fear of provoking
vacancies.
>Ground-rents seem, in this respect, a more proper subject of peculiar
>taxation than even the ordinary rent of land. The ordinary rent of land
>is, in many cases, owing partly at least to the attention and good
>management of the landlord.
Hmmm. Smith seems to be referring here to rents charged for "bare"
agricultural land that has improvements other than buildings: fences,
drainage, soil enhancements, etc.
>A very heavy tax might discourage too, much
>this attention and good management. Ground-rents, so far as they exceed
>the ordinary rent of land, are altogether owing to the good government
>of the sovereign, which, by protecting the industry either of the whole
>people, or of the inhabitants of some particular place, enables them to
>pay so much more than its real value for the ground which they build
>their houses upon;
"So much more than its real value"?? WTF?
>or to make to its owner so much more than
>compensation for the loss which he might sustain by this use of it."
?? Is Smith alluding here to the fact that the owner is unlikely to be
the most productive prospective user?
>Though I must admit that I am a bit perplexed regarding Smith's
>statement about ground rents potentially exceeding the ordinary rent of
>land.
Me too. Can anyone offer a clarification on that, or the other
questions above?
-- Roy L
.
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