combined and conservatively estimated at 5 cents per acre annually. Pro- 

 tection means chiefly the keeping out of fire, and on large tracts, the neces- 

 sary labor force can be so managed as to make the amount of this item 

 comparatively small. 



Lumbermen maintain, and often justly so, that at present conditions 

 are too hazardous to warrant the long time investment required to produce 

 timber. It is assumed in this paper that the forest owner has the benefit of 

 more efficient State and local measures for fire prevention than now prevail. 

 Until he has, he is not likely to look favorably on timber growing on a 

 large scale as a legitimate commercial enterprise. The risk from fire, wind 

 and insects cannot be closely predicted any more than can the future price 

 of lumber. We know that eventually fires will be controlled, though occa- 

 sionally forests will be destroyed, even with the best system. On the whole, 

 damages from wind and insects are light and local and do not lead to such 

 heavy losses as does fire. 



There is now no insurance for standing timber in this country, nor 

 will there be until our forests are somewhere near as safe as the German 

 forests. Until conditions become such as to make either commercial or 

 mutual insurance feasible, there remains an element of hazard in timber 

 investments, allowance for which will be made by each investor as seems 

 to him best. Where reasonable - protection is not furnished, permanent 

 forest investment is impossible. 



TAXES. 



Two methods of taxing timber are shown: Case 1, the method now 

 in general use, and Case 2, a proposed tax upon the yield only, to be paid 



when the timber is cut. 



CASE 1. 



Taxes as now levied are extremely variable, but they average about 1 

 per cent of the actual value of the property. Since assessors pay little 

 attention to young growth before it reaches merchantable size, the taxes 

 are assumed to be equivalent to 10 cents per acre per year (or 1 per cent 

 of the initial cost of land and stocking) up to the date when it is possible 

 to make the first cut. Thereafter they are placed at 1 per cent of the 

 actual stumpage value of the timber plus the original land value ($3 per 

 acre), with reassessments at the periods for which yields are given. With 

 the exception of loblolly pine, this is every ten years. 



CASE 2. 



If a given investment nets 4 per cent, an annual tax of 1 per cent 

 (one-fourth of the annual income) is equivalent to a final tax of one-fourth, 

 or 25 per cent of the yield. Since we do not know -what stumpage values 

 will be when the timber is cut, the calculation of the tax on yield is made 

 by simply reducing the yield by the same percentage as the percentage of 

 tax, and then figuring the cost of producing this reduced yield without 

 taxes; that is, if 25 per cent of the selling price of the stumpage goes to 

 the public in lieu of annual taxes, the cost of growing the timber is the 

 same as if 75 per cent of the given yield had been obtained with no tax 

 at all. 



With the interest rate at 5 per cent, the final tax must be 20 per cent 

 to yield a return equivalent to a 1 per cent annual tax, and similarly, with 



