154 FOREST VALUATION 



interest, in the form of discount, cannot be neglected for it 

 vitally affects present values, which are the basis of present 

 taxation. Whether or not an income tax to be collected at a 

 future period shall be reduced on account of deductions from 

 income of interest on costs, depends upon the desirability of 

 encouraging industry by granting this absolutely just conces- 

 sion in advance. 



163. Scientific Taxation: Combined Capital Tax and Income 

 Tax. The two systems of taxation, capital tax and income 

 tax, are thus seen to be interchangeable for property producing 

 annual income (C), but to give widely divergent results for 

 property whose income is intermittent (A}. In the latter 

 case, either system is open to grave objections. The capital 

 tax can properly be computed only for the year following the 

 yield, when it is most difficult to determine it exactly ( 116). 

 The income tax wholly fails to satisfy the need for current 

 revenue for which taxes are levied. The third difficulty is that 

 during the growth of the timber and in absence of definite pro- 

 vision to the contrary, the constant tendency will be to levy 

 the capital tax upon the existing value of capital including the 

 timber as if this temporary capital value were permanent and 

 capable of producing permanent annual income ( 156). 



In order to secure regular annual revenue from taxation 

 in the absence of regular income from lumbering or cutting, 

 and at the same time convince the public that owners of timber 

 property are paying their full share of taxes, it is theoretically 

 possible to assess the capital value of the property at a portion 

 of its value and postpone the collection of the remainder as an 

 income tax. 



In case A, the soil has a capital value of $10.02, but can be 

 purchased at $5.00 per acre.* A tax on $5.00 at 2 per cent 

 will amount in 50 years to $20.93, leaving $21.04 available as a 

 tax on stumpage at time of cutting. This amounts in each case 

 to 12.5 per cent of the "gross" value, or 20 per cent of the 

 "net" value of the yield. 



* This discrepancy in values is possible in regions where the value of land for 

 forest production is not fully appreciated. 



