162 Canadian Forestry Journal. 



2. That one plot, call it No. i, be devoted for 60 years to 

 the production of farm crops, and that the other. No. 2, be planted 

 to trees to be harvested at 60 years. 



3. That money be worth 5% per annum compounded 

 annually to the owner of the lands. 



4. That it is desired to adjust the taxation of the two plots 

 so as to bear equally heavily on the production of the farm crops 

 and the wood crop. 



The problem: If $1.00 per year be the tax assessed on plot 

 No. I, devoted to^the field crop, what should be the annua Itax 

 on the woodlot, plot No. 2? 



The relative burden of tax rates on crops can best be dis- 

 covered by finding in each case the proportion the amount of the 

 tax bears to the net value of the crop at the time of the harvesting of 

 the crop. This being so, tax rates on plots Nos. i and 2 must be 

 so adjusted as to take an equal proportion of the net value of 

 the crops on Nos. i and 2 at the time of harvesting. For example, 

 a tax rate of $1.00 payable yearly on plot No. i would be equally 

 burdensome to the owner as a tax of $60.00 payable at the end 

 of every 60 years on plot No. 2. In each case the tax would 

 amount to just i-io or 10% of the net product at the time of 

 harvest. 



Taxes, however, are usually paid annually whether the owner 

 receives an annual or periodic return from his land. $60 pay- 

 able at the end of every 60 years being the equitable tax rate for 

 plot No. 2, it remains to be fotmd how much would be required 

 to be deposited annually at 5% compound interest to amount to 

 the $60 at the end of 60 years. The equation is 



$60.00 , nc 1-7 ^ 

 (1.05)60-1 ^ 05 = 17 cents. 



That is, a tax of 17 cents per year paid annually for 60 

 years on plot No. 2, money being worth 5% per anntmi, will at 

 the end of the 60 years have amounted to $60, or i-io the value 

 of the then maturing crop. 



Hence, the conclusion that if money be worth 5% per anntmi 

 to the farmer, and that it requires 60 years to mature his wood- 

 lot plantation — two assumptions which can hardly be doubted — 

 an equitable tax rate based on the value of the soil for producing 

 purposes should be in the case of woodlands but 17-100 or 17% of 

 the rate paid on neighboring lands of similar quality used for the 

 production of farm crops. 



The amount of the unfairness of a similar annual tax for 

 both plots may be seen by comparing the accumulated value of 

 the tax rate up to the time of harvesting the crops. For this 

 purpose, let the annual tax on each plot be $1.00. 



