SHALL WE CAPITALIZE OUR FORESTS? 223 



The writer does not know of a single State which is charging the 

 cost of its planting and land purchase to the future forest as capital 

 liabilities. 



Furthermore, our governments have a tendency to subsidize the 

 private growing of trees. Two States have already made appropria- 

 tions providing free trees for the use of their citizens in establishing 

 new forests. A similar law passed the New York State Legislature 

 at the last session, but was vetoed by the Governor to cut down 

 expense. 



These tendencies may be good if the public has looked ahead, has 

 counted the cost, has made up its mind to see the work through to a 

 successful finish, and does not weaken when it begins to feel the 

 burden. Before discussing the effect of continuing them, it is neces- 

 sary to determine whether they result in a properly capitalized forest. 



From the previous discussion of capitalization, it is evident that if 

 the present discounted value of all expected future net income is taken 

 as the basis of capitalization, these forests are capitalized. On the 

 other hand, there are no capital liabilities charged up against these 

 capital assets. These forests are under no obligation to return to the 

 Government or to the taxpayers or their assigns, any given amount. 

 The writer recently pointed this situation out to an accountant and 

 asked him whether these forests were "non-capitalized," or what was 

 the proper term to describe it. The accountant replied, "I should 

 simply call it wrong and not try to find a term to describe it." 



Right or wrong, some people make light of this situation. The claim 

 that regardless of where the cost is charged on the books the cost of 

 raising the forest is the same ; that the future stumpage price will be 

 determined by supply and demand ; and that therefore, this situation 

 has no effect on the safety of private capital invested in the growing 

 timber. The writer admits that it may work out that way, but the 

 history of our public domain shows that if the Government is a large 

 holder of stumpage when the forests which are now being grown are 

 ready to cut, the result may be very different. 



Our public domain was obtained in part through the Louisiana 

 Purchase; the settlement of the Oregon boundary; the treaty following 

 the Mexican War; and the Gadsden Purchase, all of which represent 

 actual expense of one kind or another to the Government. As far as 

 the writer has been able to learn, all of these expenses were paid for 

 out of income at the time, or were added to the general public debt to 



