136 REPORT OF THE FORESTRY COMMITTEE 



new forest is established the tax must be paid at once, and continues annually 

 in spite of the fact that for many years there is no yield from the forest. Some 

 states make allowance for this by providing that new forests shall be exempt 

 from the ground tax for a definite period of years, averaging from twenty to 

 thirty years as a rule. 



On account of the difficulties inherent in the ground tax this form of taxation 

 has gradually declined in importance. In only a few states today is the ground 

 tax the principal method of taxing forests. In most progressive states the ground 

 tax remains only as a supplementary tax in a system based primarily upon other 

 methods of taxation, or else has been given up entirely as a state tax. As the 

 basis of local taxation it is still important and will doubtless long continue. 



The Income Tax. — Most European states have as a more or less important 

 part of their revenue system a general income tax. This is a tax upon incomes 

 from certain specified sources, which include pretty much all important sources 

 of income. The income from forestry is subject to the income tax where such 

 a tax exists. As a general rule it may be stated that all receipts, either in money 

 or in kind, are subject to the tax. This includes major cuttings, intermediate 

 yields, and incidental uses, and includes also ordinarily the money value of any 

 forest products taken by the taxpayer for his own personal use. The taxable 

 income is normally the net income, deductions being made for the ordinary costs 

 of administration and management. Deductions are also allowed for interest 

 upon debt and to some extent for depreciation of the capital. Costs of reforest 

 ing cut-over areas are regarded as expenses and deducted. Costs of establishing 

 new forests, however, are ordinarily not considered expenses, but rather invest- 

 ment of new capital, and are therefore not deducted. 



The income tax, unlike the ground tax, is a personal tax. Instead of assum- 

 ing a certain normal income, as is done under the ground tax, the income tax ta:kes 

 account of the actual income received by the individual in question from the 

 particular source specified. In administering the tax, account is taken also of 

 the personal circumstances of the taxpayer, and abatements are allowed where 

 special circumstances have impaired taxpaying ability. In the case of forestry 

 some allowance is ordinarily made for irregularities of income by providing that 

 the taxable income in any year shall be the average of the incomes of the forest 

 for the past three years. Deductions likewise are made for the average adminis- 

 trative expenditures of the past three years. 



The rates of the income tax vary with the size of the income and are differ- 

 ent in different states. It is seldom that the maximum rate exceeds 5 per cent. 



In many of the European income-tax laws the attempt is made to distinguish 

 between income on the one hand and yields which cause reduction of the capital 

 on the other hand, the general rule being that the taxable income is only such as 

 can be obtained without a reduction of the capital source from which it comes. 

 Obviously this distinction is very difficult to apply in the case of forestry. Much 

 confusion and disagreement among authorities has arisen over the application 

 of this part of the law. In some states no attempt is made to make such a dis- 

 tinction, but all forest yields are treated alike as forest income subject to taxation. 



