Considering the smaller volumes and poorer qualities with the Quality 

 II soil the taxable values would be worth only about two- thirds as much, 

 and with Quality III soil one-third as much; hence taxes may be assumed 

 to be only two-thirds and one-third as much respectively, both as to first 

 cost and interest accumulated. Taxation will be further discussed on 

 the basis of the cost tables forming part of this discussion, after those 

 tables are presented. 



Interest on Taxes Under General Property Tax 



Compound interest must be computed on the amounts paid in taxes 

 from the time paid until the timber is mature. The specific amounts de- 

 pend on the interest rates and the age to which timber is held, and will 

 be considered hereafter. 



Matters Which Influence the Above Elements of Cost 



(a) Ownership. The chief classes of forest owners as affecting 

 these elements are the federal government, the state, municipalities, large 

 corporations, small corporations, and individuals. The chief items affected 

 by ownership are: 



(b) Taxes. The federal government pays 25 per cent of the gross 

 yield directly to the states and expends another 10 per cent on roads, but 

 as the roads are of equal value to the forests only the 25 per cent paid 

 to the states will be considered as a gross yield tax. Lands owned by 

 states and municipalities are also in a sense not subject to tax, but in 

 another sense if we assume that the land would be worked under forest 

 management either publicly or by private owners we may conclude that 

 the state and municipality will lose tax revenue by reason of their land 

 ownership, because of withdrawing lands from taxation, and must there- 

 fore make up from their forest revenue the deficit in their general fund 

 as discussed hereafter. 



If the federal government and the private owner pay 25 per cent 

 of the gross yield of the forest for taxes, the state and municipality should 

 set aside 25 per cent of the gross forest revenue from stumpage for their 

 general fund. If the municipality is the owner it might be required to pay 

 the state such a part of the 25 per cent set aside as the state's share of the 

 taxes amounts to, and which will otherwise be lost by holding the land in 

 public ownership. If the state were the owner it should pay the munic- 

 ipality, or local taxing body its proper share of the 25 per cent. Of course 

 in practice this system of book-keeping might not be carried out in detail, 

 but in effect it would be, if the practice of forestry proceeded profitably. 



(c) Interest. This varies more widely with ownership than taxes. 

 The fact that individuals, states, and the nation have to pay different 

 rates is so well known as to need little comment except to name an aver- 

 age rate for each. The writer considers the following a fair average 

 rate for each class of owner: 



Federal Government 3 per cent. 



Sfate (Washington) 4 per cent. 



Municipality 4 % per cent. 



Large Corporation 4 % to 5 per cent. 



Moderate Sized Corporation 6 per cent. 



Small Corporation and Individual 7 per cent. 



Naturally no owner will, from the standpoint of financial invest- 

 ment, care to engage in forestry unless he can make as high a per cent 

 on his capital as he will have to pay for borrowed capital, or at which 



