150 FOREST VALUATION 



the forest coincides with net value of the yield, and the tax, there- 

 fore, takes 40 per cent of this profit. 



Since no one would dispute the desirability of subtracting these 

 current cash expenses previous to taxing stumpage value, it is 

 evident that for forests producing an annual income, the tax on 

 forest capital and on forest products are equal in value and inter- 

 changeable. 



160. Scientific Taxation: Forest Land Tax. The value 

 given for forest soil in case A is found by discounting the value 

 of the final crop for 50 years, treating it as a recurring income, 

 and subtracting the discounted cost of planting and annual 

 expenses in the same manner ( 116). This gives $500.95 as the 

 capital value of the soil just after removal of the crop. 



The tax of 2 per cent on this value for 50 years amounts, 

 in cash, to but $10.02 per acre, as against a cash total of 

 $64.79 pa-id by forest C. A study of the table explains this 

 discrepancy. The sum of $31.93 represents compound interest 

 on these taxes during the 50-year period. The further sum of 

 $22.84 represents a saving due to the fact that the capital value 

 adopted as a permanent basis for taxation is determined just 

 subsequent to the removal of the periodic cut of timber. This 

 requires that the future costs for planting and protection, amount- 

 ing with interest to $63.61, be deducted from stumpage value 

 previous to discounting ( 105) to obtain capital value. 



As a result of this latter deduction or allowance, the total 

 taxes with interest, paid on forest A, amount to but 25.9 per 

 cent of the stumpage value minus cash expenses, or 24.5 per cent 

 of sale value. The ratio of 40 per cent applies only to the 

 reduced value or net profit on the investment in land. 



Forest B presents conditions midway between these two 

 extremes. The capital value is found by discounting the de- 

 cennial yield and deducting the discounted lo-year accumulation 

 of expenses, giving a value of $2519.62 (117, FI). Upon this 

 value a 2 per cent tax gives a total cash payment of $50.39 

 per acre during the 5o-year period, which is increased by com- 

 pound interest to $63.38, leaving a small margin of $1.41 as a 

 saving due to the factors explained for forest A. 



