Since the supply of buildings is not constant, but may be materially changed over a period of time, a tax placed upon them is somewhat different, as regards shifting, from a tax placed upon land. Because of the relative fixity of capital invested in buildings, however, the total or partial shifting of the tax may take place only after a period of time. It may be assumed that the competition of the different forms of investment for capital will have worked itself out so that capital invested in buildings will be receiving the normal return. Suppose that the government now levies a tax upon buildings which will diminish this return, and that the owner attempts to reimburse himself by exacting a higher rental from the tenant. The rent item in the budget of the tenant is already as large as he can afford, and rather than meet an increase he will move to a less desirable building. Other tenants will do the same until some previously submarginal buildings may be brought into use. Here, as in the case of land, the product is no more valuable to the consumer because it is taxed, the tenant is unwilling to pay more than the utility represented, and the landlord must bear the burden.

Over a period of time the situation is likely to change. The pressure of the tax makes the investment of capital in buildings less profitable than before the tax was laid, and less profitable than other forms of investment which were excluded from the tax. Capital will cease to flow into this field and the supply of buildings will remain stationary. As population increases, however, the demand for buildings increases, with a corresponding rise in rentals. They will continue to rise until capital invested in buildings again will be getting the current return, when more buildings will be produced. Rentals have raised because the tax caused the supply of buildings to remain stationary, while there was a continuous increase in demand. Over a period of time, then, because of increased rentals due to a readjustment of the supply and demand, the tenant will bear the burden of a tax on buildings.

In purchasing a building the same considerations apply as in the purchase of land or bonds. If the payment of a tax is going to cause the receipt of less than the current rate on the investment, the tax, or a part of it, will be capitalized and deducted from the purchase price. To the extent that this is done the burden falls upon the seller.