472 



AMERICAN FORESTRY 



These figures do not indicate that 

 growing timber is an uneconomic en- 

 terprise. They do indicate that through 

 the influence of taxes assessed annu- 

 ally upon property which does not of- 

 fer an annual return, the final returns 

 may be largely consumed if the as- 

 sessments are high. This conclusion 

 is recognized by every economist and 

 beyond reasonable dispute. 



It is only because the general prop- 

 erty tax on forests has not been more 

 effectively administered that the results 

 up to the present time have not been 

 more serious. It is only because the 

 practice of forestry has not yet become 

 seriously undertaken that our tax sys- 

 tem has not been subjected to more 

 hostile criticism. So far we have been 

 busy with exploiting old forests instead 

 of building up new ones. But the pres- 

 ent conditions cannot continue. The 

 practice of forestry by private owners 

 must be undertaken and it is safe to 

 say that the practice of forestry can- 

 not be generally introduced under our 

 present system of taxation. 



What measures can be advanced for 

 the relief of growing timberlands from 

 the burden of unjust annual taxes? 

 Surely not a relief which means ex- 

 emption or favoritism. The most earn- 

 est advocate of reform in the present 

 system does not wish for this. Exemp- 

 tion, rebate, and bounty laws to en- 

 courage reforestation have been passed 

 by a dozen States. There is an ex- 

 emption law on the statute books of 

 New Hampshire today but it is value- 

 less and ineffective. None of these 

 schemes touch the real problem of tax- 

 ation. A reform in the method of 

 taxing forest lands must be fair to all 

 and exemptions on this basis are un- 

 justified. It seems probable that any 

 system which would be fair and just 

 to all property could not be applied to 

 forests which have long enjoyed leni- 

 ency in assessment and have now 

 grown to maturity. In other words the 

 problem is one of vital importance to 

 young forests and those which may be 

 established in the future. 



There are only three methods of 

 taxation possible which will establish 

 equality among different land owners. 



One is to legalize the assessment of a 

 percentage of the actual sale value of 

 property. If this percentage is fair, 

 the results conform to those which 

 would exist under a more theoretically 

 correct principle. The second is a tax 

 on the expectation value of the forest. 

 This value is equivalent to the returns 

 which will be obtained in the future 

 when the timber is cut discounted to 

 the present time. If the net income 

 from the timber on a given lot 60 years 

 hence could be determined now as $150 

 and with money compounded at 5 per 

 cent, the expectation value would be 

 $8.47. This amount only could in jus- 

 tice be taxed annually for the next 

 sixty years. The objections to this 

 method are vital, and would make it 

 impossible of operation in this country 

 at the present time. Timber values are 

 constantly changing and it would be im- 

 possible to anticipate the value at any 

 period in the future. 



The third method would provide for 

 levying taxes with a real approach to 

 equity. It consists in a tax on the yield 

 or income from the forest whenever 

 an income is received. Such a tax may 

 be applied to any forest, however man- 

 aged, on the basis of actual returns. 

 It simply means to take a certain per- 

 centage of the returns and this should 

 of course be relatively large. In the 

 case of our present iniquitous system, 

 it has been shown possible to deprive 

 the owner through a long period of 

 years of as much as 50 or even 75 per 

 cent of his final return. An income tax 

 of 20 or 25 per cent therefore would 

 be just and humane. Referring to the 

 example just given to illustrate the ex- 

 pectation value method, 20 per cent of 

 the income of $150 or $30 if taken as 

 taxes, would be precisely the same as 

 an annual tax of one per cent on the 

 expectation value of $8.47. While the 

 expectation value method is used in 

 parts of Europe, it is not feasible in 

 this country. A tax on yield makes it 

 unnecessary to estimate future values. 

 It does not depend on a fluctuating rate 

 of money value. It is in no sense 

 based on supposition or guess work 

 but upon actual returns received. If 



