FOREST TAXATION 



657 



mittee believes it is of the utmost importance to devel- 

 op a plan which shall be of universal application, which 

 shall be compulsory and not optional, and which shall 

 not be hedged about with the red tape of applications, 

 inspections and official sanctions. 



This goal whidh seemed quite unattainable to those of 



us who were working on the problem ten years ago, 



_ , _. , , has, we believe, been 



Recent Developments , ,, ,,. , 



_,. ... ,, i^*^ , , brought witnm our reach 



Simplify the Problem u . . , ^ c 



/ T^ J rr. > by certam developments of 



Of Forest Taxation ^,^^ ^^^^^ ^^^^^^ ./^^^ ^^. 



eral field of taxation. Two .things have happened. One 

 has been the unexpectedly rapid disintegration of the 

 general property tax with the corresjxmding rise of 

 taxes upon incomes and earnings. The other is the 

 development of new ideas, regarding the whole system 

 of state and local taxation, under the inspiration and 

 guidance of the Model Tax Committee of the National 

 Tax Association. 



These developments have greatly simplified the prob- 

 lem of forest taxation. The old general property tax 

 was intolerable in its application to growing forests. 

 The task was to find some substitute, assuming that 

 the general property tax would long continue for other 

 property in general. The one great achievement of our 

 earlier efiforts was to develop the idea of the yield tax. 

 Yet, rather curiously, the practical outcome has been, 

 not the adoption of a special yield tax for forests, but 

 tihe remarkable spread of the income, earnings, or 

 yield basis for taxation in general. While we have 

 been struggling to secure the yield principle as a special 

 concession to the forests, the general tax reform has 

 cauglit up with us. 



The problem today is no longer to find a special 



method for taxing forests in Heu of all other taxation, 



rr,, .,.,, , but to fit the taxation 



The Yield or Income ^^ ^^^^^^ -^.^ ^ 



Principle the Right Basis ^^^^ ^^^ ^^^^ ^l^i.h 



is itself destined to rest more and more on the yield 

 or income basis. For example, tihe Model Tax Com- 

 mittee proposes a system of state and local taxation 

 resting on three foundation stones: (i) the individual 

 income tax, (2) The property tax, upon tangible prop- 

 erty only, and (3) the business tax. The individual 

 income tax would of course treat forest incomes like 

 any other income. The forest owner can have no 

 grievance here. So far as the peculiarities of his busi- 

 ness are concerned this is the most favorable kind of 

 tax for him. There is no special problem for us here. 

 Likewise the business tax, where such a tax is in ef- 

 fect, will rest upon the income or yield basis, tihe one 

 best suited to the peculiarities of forest enterprise. 

 Some special adaptations to the business of forestry 

 may be desirable, but at any rate the yield principle is 

 secure. 



The only problem remaining is to find a modification 

 of the property tax which shall be suited to the peculi- 

 arities of forest enterprise. * * * * 



As has been pointed out, the annual tax on the land 

 at the rate of the ordinary property tax is all tihe bur- 



Tax the Land Annually ^f" f^' can fairly be 



and the Timber When P"'f T" '^' .^'''''- 



Cut or Mature "f Zr 1 uT" 



an additional yield tax 

 is excessive. Those who have proposed this have ap- 

 parently had the feeling that to grant entire exemptioi 

 of growing timber without any compensation was too 

 great a concession or else have had in mind the mature 

 forests, which as we shall show must be called upon 

 for more than the land tax. As regards growing for- 

 ests there is no principle either to Justify a yield tax 

 or to measure its amount, if the land is already sub- 

 ject to annual taxation like other property. Such an 

 additional yield tax is justified only in consideration of 

 a reduced rate of the land tax, as proposed by the 

 Committee of 1913. 



When we were seeking a special forest tax in lieu 

 of all otiher taxes, it was felt that the annual land tax 

 at the regular rate, paid for many years in advance of 

 an income from the forest, was a serious hardship. 

 Now we are assuming that forests are to be subject 

 to the individual income tax and the business tax, and 

 we are seeking only an adaptation of the property tax. 

 This is not the whole tax on forests but only a part 

 of the system. The simple solution becomes practi- 

 cable and not unduly burdensome; i. e., the annual tax 

 on the land only at the regular rate of the property 

 tax, with entire exemption of growing trees. No ad- 

 ditional yield tax is required so far as tihe property 

 tax is concerned. With such a tax, there remains no 

 necessity for any optional feature, for applications or 

 inspections, for contracts or official interference with 

 the owner's management of his forest. The law would 

 apply to all lands and would simply have to provide 

 that in assessing real estate no account should be taken 

 of the value of growing trees. 



The yield tax would appear, not as an additional tax 

 in lieu of the property tax, but in the place of the busi- 

 ness tax. The forestry 



Yield Tax Takes Place 

 of Business Tax 



business is fairly sim- 

 ple. It is doubtful if 

 the complicated system that has been worked out for 

 manufacturing and mercantile business is necessary or 

 desirable for forests. The simple tax on the stumpage 

 value of forest products corresponds fairly well to a 

 tax on net income and would probably be the best 

 means of applying the business tax principle to the 

 forests. The rate of the yield tax should correspond 

 to the rate of the business tax on other enterprises. 

 Five per cent is suggested as a reasonable rate where 

 circumstances do not indicate the proper rate. 



