CHAPTER X 

 FOREST TAXATION 



149. Sources of Revenue from which to pay Taxes. Taxes 

 are levied to raise funds with which to meet the expenses of gov- 

 ernment. They therefore constitute an annual charge against 

 the wealth of the community. In both theory and practice 

 taxes are levied against persons instead of property, and are 

 gauged according to ability to pay, and not on the basis of 

 benefits received. But the effect of taxation upon the value 

 of productive property may best be studied by regarding the 

 enterprise as the source of the revenue required to pay the 

 taxes. The expense of taxes must be met eventually from 

 income, as are all other annual expenses. Taxes must be paid 

 whether or not this income from the taxed property is forth- 

 coming, and in the absence of such revenue, or previous to its 

 receipt, must be met by the investment of additional capital 



( 131). 



Such investments of capital add nothing to the value of the 

 property, and must eventually be recovered from income. 

 Should the taxes reach a proportion where the entire net income 

 is absorbed, the property becomes worthless to the owner ( 61) 

 and will be abandoned, as was the case with much cut-over 

 timberland in the Lake States in the early 'QO'S when owners 

 could see no prospect of income sufficient to pay the annual 

 taxes. 



150. Tax on Income. A tax on income is the most logical 

 method of preventing excessive taxation. The relation between 

 the income and the tax is definite and the collection of the tax 

 follows the receipt of income, thus relieving the owner of the 

 necessity of borrowing or making additional unprofitable invest- 

 ment of capital. The determination of net income raises the 

 question as to the character of expenses to be permitted as deduc- 



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