MICHIGAN ROADS AND FORESTS. 



II 



land. We have called them waste land?, and 

 they are so nearly so that we can well call them 

 that. Those lands have even been a nuisance 

 They have decreased the value of land 

 all about them and among them. They have been 

 a menace !<> any man holding property which was 

 inded by those lands, and it is for those 

 hinds that we o;ight to do' something. We have 

 for thirty years and more to get them on 

 the tax-roll and t > make them into agricultural 

 land, and to my mind that effort has lasted long 

 enough. I think we had better make a new be- 

 ginning and try it with something that we know 



i those lands. 



The problem is to take care of what we have 

 and to do that we have to get to the people win 

 own that part which is still to be cared for. 

 ;re not u: lands; they arc 



And we have to make a bargain 

 with the private owners which will be fair to the 

 state, and it must also be fair to the owners. 

 And unless we do so we will be in a very funny 

 position the planting of little trees at one end 

 of the line and seeing our great bodies of for- 

 - imply devastated on the other end of the 

 line. That explains the problem that is before 

 us. This is a question that will mean millions 

 and millions to the state of Michigan. The prob- 

 lem of our waste lands will probably mean not 

 less than six or eight million dollars. It will 

 not mean six or eight million dollars for once 

 or twice: it will mean that and more for all time 

 ::K>. But it means a better state and a more 

 beautiful state. 



TAXATION OF FORESTS. 



Dr. Fernow, of Toronto, Canada, Leads the 

 Discussion. 



S. M. Lemon, of Grand Rapids, who was 

 next on the program to make an address on 

 "Forestry in Michigan Politics." was unable to 

 be present, and the convention plunged into 

 the subject of taxation of forests. Dr. B. E. 

 Fernow. dean of the Forestry Faculty of the 

 University of Toronto, covered the ground in 

 an exhaustive manner. His paper follows: 



The problem of just taxation, not only of tim- 

 ber lands, but in general, in all parts of the 

 United States, has been agitated for years, with- 

 t. having produced any very marked 

 progress towards its practical solution. This 

 very day and hour a large convention of the most 

 competent expert.- on the subject is meeting at 

 Columbus. Ohio, to discuss the problem, but it 

 may astonish you to hear that among the forty- 

 two addresses announced in the programme, not 

 one deals directly, and perhaps not even indi- 

 rectly, with the subject that is to occupy this 

 meeting. 



From this fact two conclusions may be drawn. 

 namely, that the subject of taxation is a very 

 broad and complicated one, the many phases of 

 which even experts can hardly encompass and 

 analyze clearly and incontrovertibly : and sec- 

 ondly, that it is very doubtful whether a prac- 

 tical solution and a practical application can be 

 secured in short order. \Ye are still in need of 

 popular propaganda and education of the public. 



I am afraid you have chosen the least appropri- 

 ate spokesman to open the discussion, for I do 

 not only not claim to be an expert on tax ques- 

 tions, or even a well posted amateur, but, more- 

 over, having carefully thought on the subject. 1 

 have come to hold opinions which. I am almost 

 sure, do not express the wishes and expectations 

 of the majority here present. I accepted the call 

 in the simplicity of my ignorance, and I suppose 

 that I was chosen for the task of introducing the 

 subject not because of my opinions, but because 

 of my academic position, which ought to enable 

 me to present systematically and without bias the 

 points for discussion. At least in this spirit I 

 propose to attempt the task. 



I am to make the charge to the jury, like a 

 judge who may have opinions of his own regard- 

 ing the case, but is not to divulge them. He is 

 simply to point out what principles are involved 

 in judging the case, what evidence there is for 

 or against settling the moot question one way or 



the other, what points need to be considered in 

 arriving at a verdict. 



My difficulty will be to cover the subject suf- 

 ficiently within the reasonably limited time of an 

 introduction. As I had not seen the program 

 which gives subheads to be talked about, you wil 

 allow me to approach the subject in my own way 

 and my remarks will have to be necessarily frag- 

 mentary, and suggestive rather than exhaustive. 



The subject of the taxation of woodlands has 

 been for some time urged as one which is of 

 importance to the development of forestry prac- 

 tices in the handling of timberlands. And the 

 discussions have charged the absence of such 

 practices to excessive taxation, which forces the 

 lumberman to be satisfied with a mere rapid ex- 

 ploitation instead of management for future crops. 



The Main Questions. 



Two main questions arise when discussing for- 

 est taxation : First, what points must be consid- 

 ered in securing the assessment of an equitable 

 tax ? Second, will such equitable taxation or pise 

 tax reduction or exemption secure the applica- 

 tion of forestry practice to timberlands? 



The first thing to recognize is that very widely 

 differing kinds of property, of widely different 

 value, are liable to be taxed as woodland. 



There are at least three classes of woodland; 

 the virgin uncut marketable timber ; the cut-over 

 lands with promising growth of value ; the stump 

 lands without value, unless through special effort. 

 And a fourth class may be added, as yet little 

 developed, namely, artificial plantations, on which 

 this effort has already been spent. 



That these three or four classes deserve dif- 

 ferent treatment will be readily admitted. 



What are the points regarding the first class. 

 the uncut timberlands? It is property of high 

 value, immediately available . by mere exploita- 

 tion by destructive lumbering. It is also cap- 

 able of being made a continuous revenue pro- 

 ducer, by conservative lumbering. How does the 

 tax assessor approach it? 



In all political questions and taxation is a po- 

 litical question in the broadest sense principle 

 and expediency, i. e., theoretical and practical 

 considerations are involved, and, especially in a 

 community still in the pioneering stage, the latter 

 derations, those of expediency, will often 

 outweigh the force of acknowledged correct prin- 

 ciples. The argument that the timber land 

 owner, being the richer man. possesses greater 

 tax paying faculty, i. e.. can afford to pay a rela- 

 tively higher tax rate than the poorer settler, is 

 sufficient to justify the neglect of the principle of 

 justice and equal treatment. The argument that 

 the settler has in view permanency, continuity in 

 creation of values from the soil, continuous im- 

 provement, that all his work tends to form a per- 

 manent asset for future assessment and taxation, 

 while the lumberman has in view merely exploit- 

 ation and the removal of values which he has 

 not created this argument, at least in a pioneer- 

 ing community, very naturally and properly 

 weighs with the tax assessor so as to set the 

 principle of justice at naught. He naturally 

 favors the farmer, and "slicks'' the logger, 

 whose greater wealth enables him to contrib- 

 ute, at a higher rate, towards the development 

 of the country, the county and the township. 

 It is human nature to do so, and human nature 

 forms an unavoidable third factor in solving 

 political uestions. 



While the tax assessor maintains equity in the 

 rate, he considers inequality in valuation justifi- 

 able according to the tax faculty ; and effective- 

 ness rather than justice is his aim. He also takes 

 into consideration the attitude of the owner. It 

 is this attitude towards his property that distin- 

 guishes settler and lumberman, and that seems 

 to explain and to justify a seemingly unjust dis- 

 tribution of the burdens of taxation. If it could 

 be shown that the timberland owner had the in- 

 tention of making his property the basis of a per- 

 manent enterprises, the case would perhaps be 

 looked at differently, but until such bona fide 

 change of attitude can be shown. I fear, practical 

 considerations will favor continuance of present 

 practice. In this connection a few questions may 

 be formulated, which should be considered as per- 

 tinent from the practical point of view : 



Pertinent Questions. 



1. Does the lumberman as a rule buy land, or 

 does he buy timber? That is, does he consider, 

 in his purchase, the soil and its capacity for pro- 

 duction, or only the product? 



2. Is any lumberman known to have bought 

 timber for any other purpose than exploitation or 

 speculation, i. e., resale of the timber? 



3. Does not every lumberman with business 

 capacity, in buying timber anticipate the tax as- 

 sessment and discount it in his price? 



4. Has actually any lumberman been induced 

 to cut his timber jn order to avoid the tax rate, 

 or are not other motives than excessive taxation 

 invariably the reason, or at least more potent 

 reason, for his removal of it? 



5. Has any lumberman become poorer by risk- 

 ing the higher tax rate, when compared with 

 the settler and his lower tax rate or a- 

 ment? 



6. Does not the lumberman shift the tax on 

 the consumer of his goods, wholly or in part? the 

 tax being counted as part of the cost of produc- 

 tion? 



T. Does not. in view of the rapidly increas- 

 ing stumpage values, the tax rate appear to be a 

 relatively small matter? 



In Ontario, at least, as far as I can find out, 

 there is, as a rule, no complaint on the part of 

 the timberland owners on the score of iniquitous 

 tax. On the contrary, although in a given case, 

 which lately came to my knowledge, the per acre 

 assessment is not changed after the timber is 

 cut. the owner is satisfied and unwilling to clamor 

 for justice, because in comparison with the 

 stumpage price and possible future values of tim- 

 ber and land the average of assessment of cut 

 and uncut lands is fair enough. Timber lands 

 have been, and are still, among the most profit- 

 able properties, and these more than any other 

 properties increase in value by ''unearned incre- 

 ments." Even the principle of justice seems to 

 be satisfied by charging profitable properties with 

 higher tax assessment than unprofitable ones, and 

 this principle of uneven assessment is found in all 

 systems of taxation. 



While, then, in pioneering communities and 

 considering the attitude of the exploiter, a higher 

 assessment for timberlands would appear justified 

 than for farm properties, yet even here some just 

 and fair principle should' be applied in the as- 

 sessment, and a check to arbitrariness sup- 

 plied. 



Forests Unfairly Taxed. 



That forest properties are most unfairly taxed 

 admits hardly of doubt, especially when it is 

 considered that such properties do not receive 

 the protection or other consider 

 entitled to from the municipaliti' 

 the tax. Not only does there - 

 uniform principle behind the ass* - 

 but the ability of the assessor t 

 and reasonable valuation is often and 



his assessment is more or less a g 

 miss,'' but mostly a "n: 



There are only three equitable methods of as- 

 sessing land property: namely, by the actual or 

 estimated sale value as it stands with improve- 

 ments, which supposedly represents its income 

 producing value : the German Vermogensteuer ; 

 by the actual or estimated average income or 

 profit or revenue which it produces, Einkom- 

 mensteuer ; by the possible or eventual income or 

 profit or revenue it might produce, its productive 

 power, its rent valuem Grundsteuer: or else a tax 

 system in which any two or all three methods are 

 employed, supplementary to each other, might 

 je devised. 



In the case of the rent value assessment it is 

 not the actual yield, but the yield capacity that is 

 assessed, no matter whether the owner lets the 

 !and lie barren or uses it not in a manner not 

 suitable to its capacity, and leaving out of con- 

 sideration whether the land bears forest or is 

 improperly stocked. What it could, under rea- 

 sonable management, produce by itis annual 

 growth or increment, can be established for a 

 forest acre as well as for a farm acre. 



In the case of the income tax, the actual net 



