FOREST TAXATION 



659 



virgin timber states, at least, the burden has been in- 

 creasing more rapidly on timber than on other wealth. 

 The owners of large tracts of mature or virgin timber 

 have reason to be alarmed. 



What makes the matter of public interest is this : 

 The mature forests represent a national resource of vital 

 WVi V> KT importance to the wellbeing of the 



J + 17 t people. This store of wealth has 



interest Jinters ^^^^ gradually built up by nature 

 during many past years. Its utilization has for some 

 time been proceeding more rapidly than its restoration 

 by natural growth and plantation. The store is dimin- 

 ishing and virtual exhaustion may be foreseen in the not 

 distant future. It must be repeated that taxation is not 

 the cause of this condition and that no change in tax 

 methods will materially alter the situation. This is not 

 primarily a tax problem. Taxation becomes a considera- 

 tion in one way only. If through the faulty tdministration 

 of the property tax mature timber is subjected to an 

 excessive burden of taxes, the owner, already burdened 

 with heavy carrying charges, may find himself forced 

 to market timber before the economical time, suffering 

 less himself and hastening unduly the depletion of the 

 nation's forest resources. 



Of course, by this same token, the forest owner would 

 benefit and the exhaustion of the forests be perhaps 

 retarded by special favors in the way of reduced taxes 

 or entire tax exemption. But this is a program which 

 your committee has refused to consider, standing firmly 

 on its purpose to find a tax system which shall place on 

 forest owners their fair burden of taxation, no more, but 

 also no less, as compared with other tax payers. It is 

 not believed that the public interest as a whole has any- 

 thing to gain through the granting of special tax favor.s 

 to this class of tax payers. 



On the other hand, the forest owner is entitled to 

 fair treatment. He has the right to ask two things: 

 . ^ . . , , (1) that his total tax 



Forest Owner Entitled burden shall not be ex- 

 To Fair Treatment ^^^^.^^ as c o m p a r e d 



with other tax payers and (2) that the amounts exacted 

 from him shall not be arbitrary and uncertain. The lat- 

 ter consideration is possibly even more important than 

 the former. It is especially vital to the forest owner, 

 whose income may be long deferred while interest and 

 other expenses run steadily on. There is danger that the 

 just taxation to which the forest owner is entitled may be 

 denied him, either through the inherent defects of the 

 property tax as applied to forests whose cutting is neces- 

 sarily deferred, or through the assessment of market- 

 able timber at values relatively higher than are placed 

 upon other taxable wealth. 



The problem of taxing mature timber has not received 

 the study which has been devoted to the taxation of 

 growing forests, and the solution is not so obvious. The 

 former committee(in 1913) made certain tentative recom- 

 mendations, while admitting frankly that it was not pre- 

 pared to say that its plan would fit the conditions in 



those states of the Pacific Coast, the south, and the ex- 

 treme northeast where the most extensive areas of virgin 

 forest are found and where the problem is most serious. 

 The sub-committee of the National Conservation Con- 

 gress also made suggestions, likewise somewhat tentative. 

 In seeking a solution, your committee starts with 

 these principles: (1) that mature timber should be taxed 



so far as possible, on 



a par with other 



Tax Forests on Even 



Terms With Other Wealth . , , . 



wealth and busmess; 



(2) if there is an individual income tax, it should relate 

 to forest income the same as any other income ; (3) where 

 there is a special business tax, it should take the form of 

 a yield tax for forest enterprise. These principles are the 

 same as have been recommended for growing forests 

 and their discussion in that section applies generally 

 here; (4) the property tax as applied to marketable 

 mature forests should be the equivalent of an annual tax 

 upon the land and trees, assessed in the same ratio to 

 true value as prevails for other taxable property in 

 general, and at the same rates as are applied to other 

 wealth ; (5) the property tax when applied to forests of 

 mature timber which will not be marketable till some 

 time in the future should take account of the fact of 

 deferred income. 



It is the practical application of the last two principles 

 which presents the difficult problem. As has been pointed 

 out, the owner of marketable mature timber has no rea- 

 son to complain if the property tax is applied to his 

 forest on even terms with other kinds of property. But 

 this is not enough for the owner of unmarketable mature 

 timber. Yet the legal separation for taxation of these 

 two classes of mature timber is probably impracticable. 

 There would be too much of personal judgment involved, 

 and disputes and unequal treatment would almost cer- 

 tainly follow. What we must seek is an equitable method 

 of applying the property tax or its equivalent to all 

 mature forests. 



From tlie point of view of the forest owner, the most 

 favorable solution would probably be the pure yield tax. 

 ,, , _ . ,, But the pure yield tax will 



Why the Pure Yield ^^ ^^ ^^^ ^^^ ^^^^^^^ ^^ 



Tax Won't Work ^^^^^. ^^^ ^^e owner of mar- 

 ketable mature timber, who chooses to hold it uncut for 

 sale in the distant future or as a pleasure park or hunting 

 ground, must not be permitted thus to postpone his tax 

 contribution indefinitely or avoid it altogether; (2) the 

 resulting irregularity of public revenue would be a seri- 

 ous matter, especially in those localities where virgin 

 timber composed a large part of the taxable wealth, 

 these being the very communities where the problem of 

 the taxation of mature timber is most acute. As has 

 begn observed heretofore in this report, there are ways 

 of adjusting this irregularity of revenue, but nevertheless 

 the public appears unwilling to take the chance. There 

 are other serious difficulties, both theoretical and prac- 

 tical. We are quite safe in concluding that the pure 

 yield tax is not the solution. 



