TAXATION OF FOREST PROPERTY IN NEW HAMPSHIRE rr 



applied to forests, it is especially wrong 

 because the income from the forest is 

 available only at long intervals and in- 

 stead of being removed each year to 

 be spent and enjoyed or reinvested else- 

 where, is stored up on the trunks of 

 the trees and taxed not once but each 

 succeeding year, over and over again, 

 for forty or fifty years longer, until 

 the timber is mature and ready to be 

 cut. There is a fundamental differ- 

 ence between levying an annual tax on 

 property producing an annual income 

 and levying an annual tax on property 

 producing an income only at long in- 

 tervals. The dift'erence is a matter of 

 compound interest. 



It may be illustrated in the case of 

 two lots of land of equal value with- 

 out any growth. One is planted to 

 forest trees and the other to field crops 

 in such a manner that each lot will 

 produce an annual revenue of $10. 

 The field crop is harvested annually 

 and the $10 received each year for 

 sixty years. The forest crop is har- 

 vested but once, at the end of sixty 

 years where the accumulated income 

 of $600 is received. But during all 

 these sixty years the income of $10 

 withdrawn each year from the field 

 crops has been accumulating at com- 

 pound interest until at the end of the 

 sixty years at 5 per cent the total value 

 is not $600 as is the case with the 

 forest crops, but actually $3,535.80 or 

 nearly six times as much. If these two 

 lots are assumed to be physically the 

 same and are so taxed then no man 

 would invest his money in forest prop- 

 erty. 



It is only fair to state at the out- 

 set that the burden of unjust taxation 

 has never fallen upon timber prop- 

 erty which is now mature. In the past 

 taxes have not often led to premature 

 cutting. The serious problem today 

 rests with the young and partly ma- 

 ture timber and upon the land whose 

 owner wishes to re-forest. It is the 

 most serious obstacle to planting on a 

 large scale by private owners. Timber 

 now mature and ripe for the axe is kept 

 longer on the tax list if the assess- 

 ments are low, but since the taxes in 



the past have been moderate no real 

 injustice is done the owner if the valu- 

 ation is raised. The mature timber 

 represents a definite value which may 

 be realized at any time. From the 

 point of view of expediency, however, 

 it is still unwise to increase the valu- 

 ation abruptly. Except in the case of 

 timber mature or nearly so the situ- 

 ation is entirely different. Valuations 

 are now much higher than they used 

 to be. There is little inducement to 

 the private owner to establish forests 

 or preserve his young growth when 

 there is every promise that the taxes 

 and accumulating interest during all 

 the years to come, when the forest is 

 yielding no tangible return, will ulti- 

 mately consume a very large part of 

 his profit. Who can say that some 

 day after perhaps a third or a half of 

 his future returns have been eaten up 

 in taxes, his still immature forest may 

 not be destroyed by fire? It is not a 

 pleasant prospect for an owner who 

 has spent so much in taxes to thus have 

 his principal wiped out of existence 

 without having had any returns from 

 it whatsoever. There is little induce- 

 ment to the private owner to plant for- 

 ests or preserve young growth when 

 he does not know from year to year 

 whether the property will be assessed 

 the same or whether the assessment 

 will be increased 50 per cent or 200 

 per cent or more. Yet this is the situ- 

 ation that confronts the forest owner. 

 Old fields reforested now with pine 

 and assessed at $10 per acre, if al- 

 lowed to grow for 50 years with a tax 

 rate of 2 per cent and money valued 

 at 5 per cent, will at the end of this 

 period have accrued taxes amounting 

 to at least $85 per acre. With a net 

 return of $300 an acre, from the sale of 

 the timber, this means over 28 per cent 

 of the final profits absorbed by taxes. 

 A valuation of $10 an acre is not ex- 

 cessive under ordinary circumstances 

 and the rate of 2 per cent is lower 

 than the present average in New 

 Hampshire. With a higher valuation 

 and a smaller net return the money 

 spent in taxes might easily reach 50 

 per cent or 75 per cent. In some cases 

 it might mean confiscation. 



