tion is not likely to be realized unless some technical advice is available. 

 Practically all governments have found it expedient to furnish this at 

 government expense. This is now being done in the Eastern United 

 States, and should be strongly recommended here. It may seem prema- 

 ture to take up such work at the present stage of farm development in 

 Washington, but as a matter of fact, large farm areas are bound to suffer 

 in the not distant future for want of timber because its obvious abundance 

 led to the cutting of every tree for lumber. The down timber will dis- 

 appear within a short ime and leave no timber available on many farms, 

 or at a convenient distance from them. Moreover, a farm woodlot may 

 usually be established in a recently logged off area at no expense, while 

 later, when all young growth has been destroyed, planting would be 

 necessary. 



It is, of course, obvious that if any owner can make forestry pay 

 one per cent or more over the rate at which he can borrow money, he can 

 on his own capital make two per cent or more above the interest rate 

 at which he can borrow. For example, if a corporation can make capital 

 invested in forestry yield six per cent and can borrow at five per cent, 

 it can carry on an operation by borrowing 50 per cent of the capital 

 required at five per cent and carrying the other 50 per cent by funds 

 leceived originally from sale of stock. Since all the capital yields 6 per 

 cent, while only 5 per cent interest is paid on half of it, the other half 

 will receive 7 per cent. If it borrows two-thirds of its capital at 5 per 

 cent, the remaining one-third receives 8 per cent dividends. In the same 

 way if a state can make capital it uses in this way yield 6 per cent, 

 though borrowed on 4 per cent bonds, the portion of its capital coming 

 from its general fund would yield 10 per cent, i. e., 6 per cent earned 

 by the general fund proposition itself, and 2 per cent additional from each 

 of the thirds coming from bonds. By using its general credit the state 

 could borrow all the funds on 4 per cent bonds and make 2 per cent on 

 all capital borrowed without advancing a cent from its general fund. Or 

 it may prefer to let its citizens have the wood products at cost and neither 

 make nor lose money. 



Taxes as an Element in Cost of Producing Timber* 



It should be noted first of all that taxes do not, as sometimes stated, 

 make up the chief cost of the production of timber. They are in fact 



*Many foresters in computing cost of growing timber, have treated taxes 

 under the general property tax as an average sum paid annually throughout 

 the life of a single crop. This introduces gross inaccuracy into the calcula- 

 tion of the interest charge on the taxes, making the taxes and interest 

 thereon appear to be far greater than is the case in practice. This may ac- 

 count for the widespread idea that taxes are the chief cost in growing timber. 

 A specific example as to what the effect of this method would be in the 

 present computation is as follows: 



The total first cost of taxation on Quality I soil in 60 years, as shown 

 in Table I, on the basis of the tax estimates on page 6, is $43.00. By the 

 method of averaging the general property tax over the entire time of grow- 

 ing a crop this would amount to an average of 72 cents per acre per annum. 

 Referring to interest tables we find that with 6 per cent interest $1.00 paid 

 annually and placed at interest for 60 years amounts to $533.14 by the end 

 of the period. Seventy-two cents paid annually would, therefore, amount to 

 .72x$533.14 equals $383.86, total accumulated sum, both principal and interest. 

 Deduct $43.00, the principal, and we have left $340.86, the accumulated interest. 

 Compare this with $77.40, the accumulated interest at 6 per cent when it is 

 computed on the general property tax sums more nearly according to their 

 actual incidence and the difference is striking. It is so great in fact as to 

 make taxes together with interest thereon, appear as one of the most important 

 costs in forestry, when such is not the case. 



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