FOREST TAXATION 151 



In computing the comparative per cents of stumpage value 

 taken by a 2 per cent tax on capital value, compound interest 

 has in each case been added to the taxes, although this item does 

 not constitute a cash outlay. It represents, rather, the equiva- 

 lent to the community of receiving taxes in advance of income, 

 or may be considered as the discounted value of a 40 per cent 

 income tax paid in annual installments throughout the growth 

 of the crop instead of at the close of the period. 



161. Comparison of Taxes on Forest Rent versus Soil Rent. 

 The point at issue between these two systems, both based on 

 the taxation of capital value, is evidently the double deduction 

 from income, first, of the future costs of production with in- 

 terest, exclusive of soil, and second, of the interest on taxes 

 paid previous to receipt of income. A forest created by plant- 

 ing or human effort passes through stage A before it can be 

 brought to condition C. Shall it, at the latter date, be taxed 

 as for C or continue to pay the reduced taxes computed for A? 



This problem depends for its answer upon whether future 

 conditions, or past conditions, are permitted to determine the 

 burden of taxation. Both cases, A and C, as well as case B, 

 represent actual present value, based on future conditions. 

 When forest A is brought into condition C, its present value 

 is no longer A but C and, based on value, it would pay the 

 taxes demanded of C. 



Taxes are based upon value and not upon cost. Future 

 costs diminish value ( 64) but past costs are disregarded in com- 

 puting value and do not directly affect it ( 68). By this reason- 

 ing, the increasing tax which would accompany increased capital 

 value is apparently justified ( 165). But just as property may 

 have a definite value and still represent a net loss to the owner 

 ( 68), it may be shown that an owner of timberland cannot afford 

 to pay taxes continuously for 50 years and then have these 

 back taxes completely ignored and be taxed on the full value 

 of his crop. The public, basing the tax on present value, may 

 ignore past taxes, but the owner, looking ahead, is not so apt to 

 overlook this future possibility. This situation can only be 

 met by a contract or tax agreement by which the public consents 



