Incentives and Old Houses

I've traveled around to various cities in the country, and have often taken a city tour. In many cities, the cheerful tour guide likes to point out some ridiculous architectural detail, and state that it was the result of some strange tax that they had way back then.

Countless cities seemed to tax houses based on their widths, so people built really narrow houses. This happened in Frederickburg, VA, Amsterdam, Holland, Charleston, SC, Hanoi, Vietnam and New Orleans.

Charleston also taxed doors, so people would enter and leave the house through a window that went floor to ceiling. In Savannah, the Marhsall House hotel veranda is accessible only though windows because doors were taxed.

There are all kinds of other examples: you'd be taxed on the number of stories at the front of the house, so people would build houses that were one floor at the street but then two or three floors in the back (so called Camel houses because they had a hump).

Sometimes homeowners were taxed on the square footage of the ground floor, so they'd use jetties to make the second floor stick out.

However, I'm not mentioning this because I'm a big fan of architecture. But I think that it does show how much people will change their behavior in order to avoid paying taxes. They'll enter through windows, live in narrow houses, have strange looking houses with strange humps or with the second floor larger than the first, etc.

Since the income tax has been established, people do all sorts of things, both legal and illegal, to avoid the taxman.

Yet, today, when various politicians say they're going to raise taxes on the rich, they believe that the rich aren't going to alter their behavior (like moving to another state, setting up various trusts, deferring income, etc). And while it's true that some wealthy people have strong connections to the local community or can't easily relocate, some can. More importantly, those of us who are not wealthy yet may decide to locate in a more dynamic state with lower taxes.