FOREST TAXATION 155 



The true equivalents between capital tax and income tax, 

 and the ratio of division between them, depend first upon the 

 proportion of capital value which is taxed, second, upon the 

 rate of taxation applied to it, and third, upon whether the com- 

 munity is willing in the future to abide by its agreement and 

 permit the owner to continue to pay taxes on the basis of 

 capital values which no longer represent the present value of 

 the property. If the rate is full, the only margin left for an 

 income tax is due to a low valuation of the land. If the land is 

 valued at its full capital value,, only a reduced rate will leave 

 a margin for income tax on stumpage. And in case the full 

 rate is collected for the full period on its original capital value, 

 the public is entitled to an additional income tax only by re- 

 pudiating the owner's claim to deduction of interest on costs 

 from gross stumpage value. In practice, capital values of land 

 tend to advance and the stumpage tax might well be levied on 

 the increased value of timber which is the cause of this advance 

 in land value. 



In European systems of taxation both capital tax and income 

 tax are usually levied, but the scientific relation between them 

 is not determined. Each tax is assessed independently, but 

 the combined taxes are sufficiently low so that the property is 

 not over-taxed. 



164. Taxes under the General Property Tax. Under the 

 general property tax, the principle of taxing capital value, theo- 

 retically the basis of the tax, is actually entirely superseded 

 by the plan of taxing sale value regardless of income. While 

 standing timber may be legitimately taxed as capital when, 

 as in case C, only the annual growth is removed, the effect of 

 annually taxing the sale value of even-aged crops is entirely 

 different. The distinction between capital and income cannot 

 be drawn with any accuracy. Case A presupposes that the 

 entire timber value represents income only and not capi- 

 tal. 



The injustice in the system consists in taxing annually, on 

 its full capital value, a property which is not producing annual 

 income, and which is being held and increased in value by a 



