Forest Resources of the Pacific Northwest 



41 



To understand them, it is necessary to know sonic- 

 thing abont the background of tlio industry. Its 

 principal profits have been derived from appreciation 

 in vahie of the timber owned. Sales of stumpage 

 (standing timber) have been so divei-se in conditions of 

 sale, and in (]uality and accessibility of the timber in- 

 volved that average stumi>age prices have but httle 

 meaning. The ui)per part of figure 21, however, which 

 is a comi^osite derived from a number of sources, gives 

 a substantially correct, though conventionalized, pic- 

 ture of the variation in values since the beginning of 

 large-scale lumber operations in the Kegion. There was 

 a rapid rise during the first decade of tins centiuy, 

 followed by a marked flattening. There followed a 

 second rise dming the World War, which, however, was 

 associated with the general rise of all commodity prices. 

 Throughout this period the tradition arose that stump- 

 age prices never declmed. The depression exposed the 

 fallacy of this generalization, for the fall which ensued 

 was drastic, although it is true that the movements 

 were small and that relatively little of the best timber 

 was thrown onto the market. Prices now seem to have 

 stabihzed, at least temporarily, at levels that are only 

 a little higher than those of 20 j'ears ago. 



The variations in the levels of the upper portion of 

 figure 21 are in part a consequence of variations in the 

 purchasing power of the dollar. In this figure, more- 

 over, the relative importance of the two periods of rise 

 is not obvious, the percentage gain during the first 

 period being far greater. Therefore, the lower part of 

 figure 21, which is derived from the ujjper, is an ecpially 

 conventionalized curve in which (a) the actual stump- 

 age values have been adjusted for the trend of wholesale 

 commoditj' prices, and (6) a logarithmic vertical scale 

 has been used which makes the sloj)e of the line exactly 

 proportional to the rate of mcrease. It will be seen 

 that, broadly speaking, the first decade of the century 

 saw an increase in relative stumpage price of some 10 

 percent per annum; the second, an increase of only 

 about 2 percent per annum, while subsequently, there 

 has been practically no increase at all. 



Most of the stumpage now in private ownership 

 passed into that status within a very few years after the 

 beginning of the century, and fortunes were made in the 

 next few years through rising stumpage prices. The 

 appreciation which was inevitable in a developing 

 region was artificially stimulated bj' a general, but un- 

 founded, fear of a timber famine within 2 or 3 decades. 

 The purchase of timber was, therefore, considered one 

 of the safest of long-time investments. 



With the decline of lumber consumption b}^ the 

 Nation, it gradually became evident that not only was 

 there no danger of an early timber famine, but that 

 assets frozen in a largo supply of timber could be 

 thawed out only at a very moderate rate. The rise 



in stumpage prices was checked, stumpage buyers 

 became less numeroiis, stumpage ownei-s began to seek 

 liquidation through the manufacture and sale of lumber. 

 Too many sawmills were built, and potential overpro- 

 duction of lumber maintained a buyei-s' market. Un- 

 satisfactory profits in lumber manufacture tended to 

 prevent further stumpage price increases. 



There is some exaggeration in the foregoing picture, 

 because the average stumpage sold today is inferior in 

 quality or accessibility as compared with that sold 

 30 years ago. Nevertheless, it is not surprising that 

 investors no longer look on timber as a desirable specu- 

 lative investment. If mature timber is liquidated 

 today, the money received therefor can be invested in 

 some other enterprise which will, presumably, earn at 

 least a moderate interest rate. Unless stum])age values 

 increase at comparable rates, it is obviously better to 

 liquidate as soon as possible. But, today, the proba- 

 bility of any such rise in stumpage values seems small. 

 The urge for immediate liquidation is correspondingly 

 great. 



Taxation 



The way in which standing timber is taxed contributes 

 largely to this urge. In the early days, timber taxes 

 were very low, but as the coimtry developed and the 

 financial needs of local governmental agencies increased, 

 taxes increased with them. By 1928, the Forest Service 

 tax inquiry found that the average tax rates per thousand 

 for the fir region were 2.5 cents for Oregon and 3.9 cents 

 for Washington. For the pine regions of these same 

 States, the averages were 2.2 cents and 3.2 cents, 

 respectively. These do not seem, at fii-st glance, exor- 

 bitant rates on stumj)age worth about $3 per thousand, 

 but the rate has been increasing; it nearly trebled in 

 the 12 years preceding 1928. It is true that this was 

 partially a consequence of the rise in stumpage prices, 

 but it is also a result of the higher costs of government, 

 and of the reduction of the tax base in many counties 

 through the approaching exhaustion of standing tind>er. 

 There are wide variations between counties, even 

 within a single State. Where lumbering has already 

 substantiallv depleted the tax base, rates are more than 

 double those already cited. Further increases tlierefore 

 seem probable. 



A very large proportion of the forest resource is 

 owned by nonoperators. Taxes are current cash ex- 

 penditures, and owners of this class have no current 

 revenues from their forest holdings from which to 

 derive the necessary moneys. It may be easier to 

 become reconciled to a disappointing future yirofitthan 

 to continue annual payments of even relatively small 

 magnitude. 



Even among opera tiug owners, the application of the 

 present system of property taxation definitely handi- 



