658 



AMERICAN FORESTRY 



We summarize our plan for the taxation of grow- 

 ing forests as follows: 



(i) The law shall provide 

 Committee S Plan criteria for determining what 

 Summarized j^ "mature timber." 



(2) All trees other than mature timber shaU be ex- 

 empt from taxation, and in assessing land no account 

 Should be taken of the value of any trees except ma- 

 ture timber. Forest lands shall be assessed no higher 

 than similar bare lands in the neig'hborhood. 



(3) All forest products (with the exception of cer- 

 tain small quantities taken by the owner or the tenant 

 for his own use) shall be subject to a yield tax at a 

 rate oorresponding to the business tax on other busi- 

 nesses. The rate would perhaps ordinarily be in the 

 neighborhood of 5 per cent. The yield tax should be 

 administered by state officers, and the proceeds dis- 

 tributed to the town or counties. 



(4) It is assumed that .if there is an individual in- 

 come tax, forest incomes will be treated exactly like 

 other incomes. 



(5) Certaiin administrative problems will arise, par- 

 ticularly in connection with the yield tax. Since this 

 matter has been fully treated in previous reports and 

 addresses, already referred to, the Committee regards 

 further discussion unnecessary. No serious obstacle 

 is to be anticipated. 



At two points this plan may require further defense. 



(i) The old general property tax was defective because 



_ (a) by taxing the total 



Plan Assures Owners ^^,^g ^^ ^^^ ^^ t,^3 it 



Reasonable and imposed an excessive bur- 



Definite Taxation ^^^ ^^^^ t^^ growing for- 



est and (h) it placed on the owner the inconvenient 

 obligation to pay annual taxes for years before any 

 income was realized. The first of these defects is 

 avoided by exempting the trees. The second remains, 

 though greatly reduced. Under all the circumstances 

 it is felt that this inconvenience must be accepted by 

 the forest owner. In return he is guaranteed a reason- 

 able tax burden made up of a small and fairly certain 

 annoia! tax on his land and a yield tax at a definite rate. 

 (2) The chief objection to the yield tax, as already 

 stated, is the irregularity of the resulting revenue. 

 , . , ^ , ,. This difficulty is present 



Irregularity of Public -^ ^^^ Committee's plan. 

 Revenue Less Marked j^ ^^^^,j ^^ ^t^ t,^^. 



ever, that the irregularity resulting from a moderate 

 yield tax (in the neighborhood of 5 per cent) combined 

 with a steady annual tax on the land is quite different 

 from the result of an exclusive yield tax (at the rate 

 of 20 per cent or thereabouts). If nevertheless this 

 difficulty appears serious, there are ways by which it 

 may be avoided. Six possible methods were suggested 

 by the Chairman in his address before the Sixth Con- 

 ference in 1912. It is not necessary to rehearse them 

 here. One of these suggested methods, involving ad- 

 vance annual payments by the owner to be later de- 

 ducted with interest from the yieild tax, has recently 



The Taxation of 

 Mature Timber 



been taken up and skillfully developed by Mr. Murphy 

 of the Forest Service. The Committee believes that in 

 most states the irregularity resulting from the yield tax 

 as recommended will not be serious, whereas for any 

 state which finds this a serious matter there are ade- 

 quate remedies. 



Our discussion thus far has related to the growing 

 forest only, with the purpose of devising a method of 

 taxation which shall be equit- 

 able to all parties concerned and 

 shall not be an obstacle to the 

 reforestation of cut-over lands or the development of new 

 forests. The mature forest presents quite another prob- 

 lem. We are here dealing with a full-grown product. 

 Two cases appear, depending primarily on whether the 

 timber is actually marketable or not. By marketable 

 timber we mean mature timber which is accessible and 

 so located with respect to market and transportation 

 facilities that its immediate marketing is possible. 

 Whether it actually is being marketed depends upon the 

 owner's judgment as to the most favorable time. There 

 is nothing in the theory of the property tax to affect ad- 

 versely marketable mature timber. A property tax 

 fairly drawn and administered with even-handed justice 

 upon all owners of taxable property would give the owner 

 of such mature timber no ground for complaint. Of 

 course, the obvious rejoinder is that this ideally perfect 

 property tax exists only in the imagination. The real 

 property tax, as we know it, is badly drawn and more 

 badly administerfed. Its application is unequal and 

 unjust. If forests of marketable mature timber are 

 taxed more heavily in proportion to their true value than 

 other classes of wealth, the forest owni.-rs have a griev- 

 ance, but it is in no way different from the grievance 

 of any other property owner under similar treatment. 



On the other hand, when timber is so located that its 



present marketing is not possible, the situation is in 



_ .r. 1 -r-r. . theory similar to that 



Tax Burdens on Virgin of the growing forest. 

 Stumpage Growing Heavier ^^^ ^^^^ ^^^^ ^ ^^^^ 



of capital whose income is deferred to the more or less 

 distant future. It is true that the timber is mature. 

 But if other causes beyond the owner's control defer its 

 marketing, the result is the same. It is the fact of the 

 necessarily deferred income, rather than the particular 

 cause of that fact, which makes the annual tax on cap- 

 ital value work injustice. * * * 



Careful investigation made ten to fifteen years ago, 

 to which reference has been made, showed that on the 

 whole forests had not, up to that time, been taxed ex- 

 cessively. Probably they had on the whole been assessed 

 more leniently than other classes of wealth. But it was 

 pointed out at that time that the epoch of lenient taxa- 

 tion was drawing to a close and that heavier and even 

 excessive taxation might be expected in the near future. 

 The past decade has fully justified this prophecy. Tax 

 burdens in general have become enormously heavier, 

 and there is plenty of evidence to show that, in the great 



