FOREST TAXATION 145 



of net income from different forms of property and industry. 

 As a means of taxing standing timber, it is a conspicuous failure 

 in this respect, as the tax rates and the total taxes paid on 

 timber bear no fixed relation whatever to the ultimate value of 

 the income. 



155. The Problem of Taxation for Timberlands. The 

 failure of the general property tax when applied to timberlands 

 is due to several causes. Imperfect and unequal valuations 

 are more prevalent with this class of property than with other 

 forms, owing to the inherent difficulty of estimating and apprais- 

 ing standing timber and the unfamiliarity of tax assessors with 

 this work. This is not a defect of the system, but merely in 

 its application. 



There are three fundamental difficulties in securing equitable 

 taxation of timber under this system, namely: 



The difficulty of distinguishing capital from income for pur- 

 poses of taxation. 



The practice of collecting taxes in advance of the receipt of 

 income. 



The element of time and the resulting problem of interest in 

 its effect on the relation between taxes, income and taxable 

 value. 



156. Distinction Between Capital and Income in Timber 

 Properly. Regarded as a crop, artificially produced, the en- 

 tire value of timber represents the income earned by the capital 

 invested in the soil. In the form of an even-aged stand, the 

 increasing value of the crop is merely the accumulating income 

 which, when finally cut, exposes the soil capital once more 

 ( 1 1 6). In determining the value of this soil capital, all future 

 expenses are deducted at compound interest. The annual in- 

 come equivalent to this final income (Formula XIII) is termed 

 soil rent, and the point of view which regards soil alone as capi- 

 tal, timber as income, and requires all values to be based on 

 compound interest, is termed the theory of soil rent. 



In contrast to this conception, land and timber together may 

 be regarded as capital. A forest which has been brought to a 

 condition of complete normality ( 109) capable of yielding a 



