30 



HARDWOOD RECORD 



In order better to forecast the capacity of 

 the Tarious regions to meet our needs for lum- 

 ber, the lumber production of each group of 

 states shown in Diagram 1 has been converted 

 into the percentage of the total cut of the coun- 

 try, which gives the curves shown in Diagram 2. 

 Thus we see that while the output in the north- 

 eastern states is still as large as it was twenty 

 years ago, and much more than it was fifty or 

 sixty years . a^o, these states have decreased 

 greatly in relative importance. Supplying nearly 

 55 per cent of tlie total lumber production in 

 1850, they furnished but 36 per cent in 1860, 

 not quite 37 per cent in 1870, and then steadily 

 dropped to 13.4 per cent in 1908. The lake 

 states passed all other regions rapidly, and 

 reached their maximum relative production of 

 over 34 per cent in 1880, maintained it until 

 1890, and have been decreasing in importance 

 for the last twenty years. Since the first evil 

 effects of the war were over, the southern states 

 have steadily increased in production up to the 

 point of supplying almost 41 per cent of all 

 our lumber in 1908. Starting on their upward 

 course in 1880, the Pacific states cut more than 

 16 per cent of all the lumber manufactured in 

 1908. 



In imagination w*e can carry these curves 

 further. It is not likely that the total produc- 

 tion of the country will at any time greatly ex- 

 ceed the high mark of 40,000,000,000 feet of 

 sawed lumber reached in 1907. The curve for 

 the northeastern states probably will soon be 

 checked in its downward course, and will ap- 

 proach a horizontal line as production depends 

 more and more upon second growth. At a later 

 period this will take place in the lake states, 

 but the present time is so close after the ex- 

 haustion of the bulk of the virgin timber that 

 the curve may continue downward, though less 

 sharply, for several years. The curve for the 

 southern states probably will assume a shape 

 like that for the lake states. After passing a 

 high maximum, a few years hence, it will drop 

 suddenly. The many big mills which are saw- 

 ing away at the easily accessible stands of vir- 

 gin yellow pine can carry heavy production up 

 close to the point of complete exhaustion of 

 large timber. In but one region, the Pacific 

 states, supplemented by the northern Rocky 

 mountain states, is there likely to be a large 

 increase in production and a heavy output for 

 many years. Here are the largest supplies of 

 virgin timber remaining in the country. Fa- 

 vorable market and transportation conditions 

 might cause an inroad upon these great forests 

 that would carry lumber production to a higher 

 point than in any other region. 



None of these curves represents a healthy con- 

 dition of the lumber industry or a condition 

 that signifies permanence. They show waste and 

 exploitation far in excess of the producing 

 capacity of the forests. A great manufacturing 

 industry that has no assurance of a permanent 

 supply of raw material is not on a safe basis. 

 The lumber industry of the future will have an 

 assured supply only as the forests are conserved. 

 How forest conservation is to be brought about 

 is not within the scope of this paper, but when 

 it is attained — as it must be attained — our 

 curves will run steady at a level of production 

 that is not beyond the capacity of the forests 

 to sustain. 



rXTNDAMENTAL EVILS OF PRESENT 



METHOD OF TAXING TIMBER 



LANDS 



[Addeess of Peo1'\ R. Fairchild of Tale Uni- 

 versity.] 



Last summer I had the honor of addressing 

 this association upon the subject of forest taxa- 

 tion, and at that time I tried to point out what 

 appear to be the fundamental evils of our present 

 method of taxing timber lands. I do not want 

 to repeat what was said at that time. Still, by 

 way of introduction, it may b.e worth while to 

 summarize briefl.v the defects of the general 

 property tax as related to forests. 



In the first place, it is not true that timber 

 and timber lands have generally been subjected 

 to excessive or unjust taxation — so far as the 

 amount of the taxes goes. Cases exist here and 

 there of undeui.ilily excessive taxation. In cer- 

 tain sections of t he country such cases are com- 

 mon. But these cases do not represent the gen- 

 eral situation, and it is likely that they have 

 attracted more attention than they deserve. 

 The trouble is not with the amount but with 

 the method of taxation. Undoubtedly the gen- 

 eral property tax, if strictly enforced, would 

 place an excessive burden ou forests. But the 

 general property tax has not been and is not 

 now being strictly enforced as a general rule. 

 But the very fact of escape from excessive taxa- 

 tion, gained in this dubious way, is an ominous 

 sign for the future. There is no guaranty that 

 lenient and easy-guing methods of assessment 

 will continue forever. 

 , Gdaranti Against Excessive Taxation Needed 



Yet some guaranty against excessive taxation 

 is necessary if owners are to practice conserva- 

 tive forestry and investors are to reforest cut- 

 over lands. This, it seems to me, is the root of 

 tlie taxation pnilib'ui. The general property tax 



is to be condemmed, not because it has been mak- 

 ing forest owners pay more than their just 

 share of the burdens of government, but be- 

 cause it is an obstacle in the way of the best 

 i;se of the forests. Requiring, as it does, an 

 annual payment from wealth which does not yield 

 an annual income : depending, as to its amount, 

 upon the arbitrary judgment of local officials ; 

 capable of taking the greater part, or even the 

 whole of the profit of a long-time forest invest- 

 ment : being, at best, an expense which no 

 investor is able to calculate in advance, the gen- 

 eral property tax imposes a handicap on forest 

 investment whose seriousness can hardly he ex- 

 aggerated. This is the fundamental defect with 

 the taxation of forests under the general prop- 

 erty tax. This is the point at which the attack 

 upon the general property tax should be directed. 



To some the idea of altering the time-honored 

 general property lax merely in the interest of 

 conservative forestry may look like a Utopian 

 dream. It should he remembered, however, that 

 we are not alone in our attack upon the general 

 property tax. 



It sometimes does us good to look at our own 

 problems in the light of the broader movement 

 of which they are only a part — to view the 

 immediate problem of our own time in the light 

 of the historical development of which they are 

 one stage. Many a sincere movement for reform 

 has been wrecked by a narrow, partial, short- 

 sighted point of view. Many a reform has been 

 accomplished only at the cost of indirectly giv- 

 ing birth to a new evil greater than the one 

 which was overthrown. The only safeguard 

 against jumping from the frying pan into the 

 fire is knowledge, and knowledge whose horizon 

 stretches farther than the immediate problem 

 and the present time. And so it has seemed to 

 me that this convention might be interested in 

 hearing something of the relation of the question 

 of forest taxation to the general problem of tax 

 reform. The complaint against the present 

 method of taxing forests is only one charge in 

 the bill of indictment against the general prop- 

 erty tax, and your own position is strengthened 

 by the knowledge that you do not have to fight 

 your battle alone, that the attack upon the gen- 

 eral property tax is being waged from a dozen 

 different camps. Many of these attacks already 

 have been successful, and each success should 

 give new courage to those who are still in the 

 tight. 



Fundamental Principle of Taxation 



The fundamental principle of modern taxation 

 is that tax systems should be based upon ability 

 to pay. aach citizen ought to pay in proportion 

 to his ability. This being accepted, the question 

 at once arises: What is the correct index by 

 which to measure ability V Two answers have been 

 made : 1. Ability may be measured by the pos- 

 session of wealth. This gives rise to the general 

 property tax. 2. Ability may be measured by 

 the receiving of income. We then have the 

 income tax and various other taxes whose burden 

 falls directly or indirectly upon income. 



The general property tax has the prestige of 

 hoary old age. Its roots are seen in ancient 

 Greece and Rome, and in the middle ages it was 

 in use throughout Europe. It was the mainstay 

 of the tax systems of our colonial ancestors. In 

 the primitive conditions of mediaeval Europe and 

 colonial America, the general property tax worked 

 fairly w'ell. Property was a fair index of ability 

 to pay taxes. In the simple agricultural com- 

 munities of that time, the bulk of the wealth 

 was in the form of land, buildings, and farm ani- 

 mals and machinery. Household furniture and 

 personal effects were few and simple. Intangible 

 personality had practically no existence. It was 

 a simple matter therefore for the assessor to 

 discover the citizen's wealth, and to appraise it 

 at its true value was scarcely more difficult. 

 There was little opportunity for concealment of 

 wealth and tax evasion. 



In modern times all this is changed. The bulk 

 of wealth is no longer in forms which are easily 

 discovered and valued. The corporation has 

 arisen, and with it the vast sum of intangible 

 personal property, consisting of securities which 

 are only the paper evidence of ownership of 

 wealth. Concealment of property and evasion 

 of taxes have come to be easy and generally 

 practiced. The assessment must usually rest 

 upon the statement of the taxpayer. Only the 

 extraordinarily honest man is proof against the 

 temptation to concealment and evasion. The 

 peculiar character of the ordinary citizen's 

 memory on the occasion of the assessor's visit 

 is notorious, and taxpayers' oaths have come to 

 be a joke. The only kinds of wealth which are 

 taxed with some degree of effectiveness today are 

 land and improvements, and the more bulky forms 

 of personal property. This is why the farmers 

 and the timber land owners are especially injured 

 by the general property tax. Their wealth is 

 taxed, while others escape. 



General Property Tax Unsuited to Modern 

 Conditions 

 Under modern conditions, therefore, the gen- 

 eral property tax is a failure. I could easily 

 l)ile up an overwhelming mass of evidence in sup- 

 port of this conclusion. The United States cen- 



sus of 1800 reckoned the total wealth of the 

 country subject to taxation at $61,000,000,000. 

 The total value assessed for taxation In that 

 year was ?25,000,000,000, or 41 per cent of the 

 true amount of wealth. Real estate was as- 

 sessed at a little over half its true value. Per- 

 sonal property was assessed at 25 per cent of 

 its value, and since a considerable amount of 

 personal property necessarily must have escaped 

 the census enumerators this figure is certainly 

 too high. It is probably safe to say that less 

 than 20 per cent — one-fifth — of the total value 

 of personal property appeared on the tax books 

 in 1890. The census figures for 1900 and 1904 

 show still worse results. In 1900 real estate was 

 assessed at 44 per cent of its true value and 

 personalty at 22 per cent In 1904, the figures 

 were respectively 20 per cent and 48 per cent. 

 To say that four-fifths of the total personal prop- 

 erty of the country is not assessed for taxation 

 is certainly well within the truth. Reliable esti- 

 mates have been made showing that something 

 like 90 per cent of the personal property in the 

 state of New York is untaxed. Every state tax 

 commission in recent years has borne witness to 

 the failure of the general property tax, especially 

 in the case of personal' property. For example, 

 the Ohio commission of 1008 (and Ohio, by the 

 way, has one of the most stringent tax laws in 

 the country) reported that not 10 per cent, per- 

 haps not even 5 per cent, of the intangible per- 

 sonal property is listed for taxation. 

 United States Alone in General Property Tax 

 The lack of harmony between the general prop- 

 erty tax and modern economic conditions has 

 been recognized by other countries. Of all the 

 European nations that formerly relied on this 

 tax, practically every one has long since aban- 

 doned it. The true index of tax-paying ability is 

 seen to be income, and on that foundation the 

 tax systems of nearly all important nations are 

 built today. 



The United States stands almost alone in Its 

 stubborn adherence to a tax s.vstem which has 

 outlived its usefulness and become a daily farce. 

 And even in the United States there are signs 

 that the general property tax is gradually going 

 to pieces. One by one certain classes of wealth 

 are breaking away. Formerly all corporations 

 were taxed in exactly the same way as natural 

 persons. Among the first to break away were 

 the banks, which are now taxed by special meth- 

 ods in nearly all states. Insurance companies, 

 railroads, telephone and telegraph companies, etc., 

 have largely been taken out of the clutches of 

 the genera! property tax and placed under special 

 tax systems better fitted to their needs. Some 

 states have placed all corporations under a spe- 

 cial tax not based on property. In this way we 

 are approaching the time when the farce of try- 

 ing to tax intangible personalty can be given up. 

 From another side the general property tax Is 

 being weakened by the demand that the states 

 give up the general property tax entirely in order 

 to leave that source of Income to the local bodies, 

 A few of the most progressive states have already 

 taken this step. Special methods of taxing mines 

 have been put in operation in some of our states. 

 When we ask, therefore, that the forests be 

 relieved of the jgeneral property tax and placed 

 under a system that shall be fair and equitable, 

 that shall be in harmony with the peculiar fea- 

 tures of forest property, we are not asking for an 

 unheard of thing. We are simply taking our 

 position with the many forces which already have 

 gained important amendments to the general 

 property tax and are destined some time to ac- 

 complish its overthrow. 



Single Tax on Timber When Cut Most 



Equitable 

 While admitting some hesitancy in proposing 

 a plan of reform in a field so wide as this, I am 

 becoming more and more inclined to the opinion 

 that the ideal forest tax is the single tax on the 

 yield of timber imposed at the time of cutting. 

 This method removes at a single stroke most of 

 the evil features of the present system. It rests 

 upon the true basis of tax-paying abillt.v, income. 

 It falls due and is paid at the same time that the 

 income accrues, and so imposes the minimum of 

 burden upon the taxpayer. It is definite and 

 may be reckoned on in advance. It imposes no 

 handicap on forest investment and offers no 

 obstacle to the best use of forest properties. H 

 imposed by a uniform system over a large terri- 

 tory it promises a good yield and no Injury to 

 the public treasury. 



In spite of the glowing advantages of the tax 

 on yield, it is probably too much to hope that we 

 shall see its general adoption in the United 

 States in the near future. The progress of re- 

 form is slow, and comes by gradual steps, not 

 by revolutionary changes. In the general con- 

 fusion of our tax system as a whole, the forest 

 tax on yield involves serious practical difficulties. 

 The complex relationship between the revenue 

 systems of our states, counties and towns, makes 

 the problem difficult. In many states constitu- 

 tional barriers will first have to be removed. 

 Holding the tax on yield before us as the ultimate 

 goal, the first steps toward reform will undoubt- 

 edly have to involve many compromises and the 

 willingness to take the half-loaf whore nothing 

 more is to be obtained. 



