160 FOREST VALUATION 



has paid $5.00 for this land he cannot afford to give the state 

 in taxes two-thirds of this cost price as well as his entire net 

 profit over 5 per cent. Such a method of taxation therefore 

 tends to prevent the private owner from undertaking the business 

 of forest production. 



Upon mature timber the effect is to stimulate cutting in order 

 to save taxes, whether or not over- taxation has already occurred. 

 Few owners stop to compute how much taxes timber should bear. 

 They know that the way to escape paying any more taxes is to 

 cut the timber. If this is the purpose of the tax it accomplishes 

 its object thoroughly, and is a great stimulus to over-produc- 

 tion of timber. The only incentive to hold mature stumpage 

 under this system is the hope that increased prices will offset 

 the taxes. The injurious effects of a bad tax system are not 

 reflected fully by depression of values ( 153), since the resulting 

 losses are pocketed by the owners as past costs, and values for 

 stumpage continue to reflect only future elements of cost and 

 profit. But upon the business of lumbering, in a region of 

 large surplus supplies of stumpage, the effect is disastrous, forc- 

 ing the weaker operators into bankruptcy and stimulating rapid 

 and wasteful cutting on the part of even the strongest holders. 



166. Tax Reform for Forest Property. From the analysis 

 of the financial relation of taxes to values, the most serious flaws 

 in the system of taxing forests on their sale value appear to be: 



1. Actual over- taxation through taxing annually the value of 

 the entire property including timber, during periods when no 

 income is produced, resulting ultimately in confiscation of an 

 inequitably large proportion of ultimate or total income. 



2. Uncertainty as to the extent of this over- taxation through 

 the arbitrary power vested in local assessors to raise valuations 

 at any time. 



Tax reform must remove these two obstacles by substituting 

 some system of scientific taxation which will secure equality 

 between forest taxes and those imposed on other property when 

 gauged by the per cent of income taken, and thus remove the 

 element of uncertainty which is even worse than the over-taxation 

 itself. 



