656 



AMERICAN FORESTRY 



Two Distinct 

 Problems 



"(i) It is proposed to place upon forest owners their 

 fair burden of taxation as compared with other tax- 

 payers. No subsidy or special favor to forest owners is 

 contemplated. The legitimate objects of correct forest 

 taxation may be obtained by a ohang in the method of 

 taxation without generally involving any reduction in 

 the taxes paid at present. 



"(2) The forest owner should be guaranteed that his 

 burden of taxation will be reasonable and that its 

 amount will bear a fairly definite ratio to the income 

 from his forest and be fairly predictable in advance. 



"(3) The various political bodies involved (States, 

 counties, towns, etc.) should be guaranteed against any 

 serious irregularity of income resulting from the chang- 

 ed method of taxing forests. 



"(4) The method of taxing forests should be such 

 as will impose no obstacle in the way of the best use of 

 existing forests and the investment of capital in new 

 forests. So far as consistent with the other objects 

 stated, the tax plan should be a direct inducement to 

 these ends." 



it has become evident that the taxation of forests 

 involves two distinct problems, relating respectively to 

 growing forests and to native or 

 virgin forests. (We shall divide our 

 following discussion into two pans 

 accordingly.) 



The idea of the former committee was to find a 

 method of taxation that should take the place of all 

 ^, _ , . , existmg taxation upon forests. 



The Taxation of j^.^ ^^^^^ practically to find 

 Growing Forests ^^ ^^^.^^^^ ^^^^^.^^^^ ^^^ ^^^ 



general property tax. It was recognized that theoreti- 

 cally such a substitute might be either (i) an annual 

 tax on the original capital value of the forest, what 

 the foresters call the "expectation value," which prac- 

 tically amounts to the value of the bare land, or (2) a 

 tax on the yield of forest products whenever obtained. 



In the first alternative the rate of the tax should be 

 tiie prevailing rate of the property tax on wealth in 

 general. The yield tax in order to impose a burden 

 equivalent to the tax on other wealth, s'hould be at a 

 rate determined by dividing the prevailing rate of the 

 property tax by the rate of interest. Thus, if the rate 

 of interest were 5%, an annual tax on original capital 

 value at 1% is equivalent to a yield tax of 20%. 



Recognizing the practical obstacles to both of these 

 alternatives, the former committee proposed a com- 

 promise involving an annual tax on the land at half 

 the rate of the prevailing property tax and a 10 per 

 cent yield tax on forest products. This recognized the 

 principle that a combination of the capital tax and the 

 yield tax should impose the same total burden as would 

 result from either of these taxes alone ; hence the 

 rates recommended. 



[Cf. Fairchild, "Suggestions for a Practical Flan of Forest Taxation,' 

 Proceedings of the National Tax Association, Vol. VI, 1912.1 



In the opinion of your Committee analysis of this 

 plan brings to light two features to which may be 



_ , , ascribed its failure to gain more gen- 



_, eral acceptance. In the first place, 



former Plan ^j^^ ^j^u ^^^ ^^^^^ American forest 



conditions would necessarily be irregular as a revenue 

 producer. In spite of practicable devices for correcting 

 this irregularity which were suggested,* the public and 

 the legislatures have been extremely cautious about ac- 

 cepting any plan which even remotely threatened to 

 introduce an element of uncertainty or irregularity into 

 the local revenue system. This is undoubtedly the 

 chief obstacle to the practical acceptance of the yield 

 tax. 



The other feature which appears as an obstacle to the 

 adoption of the former plan is this. The plan, as 

 proposed, was a compromise between the annual land 

 tax and the yield tax. As such, it gave a reduced land 

 tax, at half the rate paid by other property, to be made 

 up later by the yield tax. This was, at the start, a con- 

 cession to the forest land owner. It could be granted 

 only where there was reason to expect the future yield 

 tax. It vras essential to make careful provision to pre- 

 vent resort to the law as a means of escaping taxation 

 on agricultural or other non-forest land. 



The plan therefore involved complicated provisions 

 seeking to restrict its application to true forest lands, 

 limiting it to lands not exceeding a certain value, re- 

 quiring that the lands be properly planted or otherwise 

 stocked with suitable species of trees and that the 

 young forests be properly maintained. The special 

 forest tax was optional, to come into force only after 

 application by the owner and inspection and approval 

 by the state forester and to terminate whenever the 

 owner should desire to withdraw or the state forester 

 should decide that the forest was not being properly 

 maintained. All of this meant complicated procedure 

 and red tape and has doubtless gone far to cool the in- 

 terest of the forest owners in the plan. 



Of course any arrangement which involves a conces- 

 sion in the way of reduced taxation must be safe- 

 _, _, . guarded in some such way 



Tax Concessions ^^ ^^.^^ Some of the earlier 

 For Growing Timber ,^^^ ^^ ^^^^^^ ^^ ^^^^^ 



Not Successful i j i r 



^KA^y.y.^^x^ mvolved special favors to 



the forest owner in return for certain specihed man- 

 agement of his forest under a contract with the state. 

 Forest owners have been very reluctant to bind tliem- 

 selves by such contracts, and the laws containing this 

 feature have everywhere failed to produce results. 

 But even where there is no intention to give any ulti- 

 mate favor to the forest owner, the presence of an in- 

 itial concession requires some safeguard against abuse. 

 Hence nearly every plan of forest taxation that has 

 appeared in the past ten years has involved restrictions 

 upon its application similar to those contained in the 

 plan of the former committee. This is believed to 

 have been the chief reason for the failure of all these 

 plans to obtain more general acceptance. Your com- 



