Il6 FOREST VAI^rjATION 



Pennsylvania and Connecticut employed ten per cent without 

 apparently attempting to develop a reasonable basis or giving an 

 explanation. 



The Massachusetts Commission, see Senate document number 

 426, 1914, made an effort which proves instructive. Its premises are : 



Rotation, 50 years, also assumed by Connecticut and Vermont 

 in recent acts (setting a general rotation is of very doubtful value 

 and certainly 50 years will not raise proper sizes for general mar- 

 ket) ; 



Tax rate, $17.39 per $1,000 worth of property: 



Yield at 50 years, $240 ; value of land, $5 per acre ; interest rate 

 for total tax, 8% ; for land tax, 5%. 



The plan is to pay a yearly tax on the land and pay a yield tax 

 at the time of cutting the timber. The reasoning is this : the income 

 from this property consists in the timber cut. The tax on this in- 

 come or timber is the tax for the whole property, timber and land. 



The land tax is paid to furnish a yearly income for the local 

 government but should be deducted from the yield tax which is the 

 principal tax which the property should pay. 



Computation of yield tax or principal tax : 



The present value of Yr pays taxes every year at rate of $17.39 

 per $1,000, and this is to be compounded at 8%, so that for $1 of 

 Yr we have: 



I i7.-?o /1.08"— 1\ 



Of this 21 cents only 2/3 is taken, since it is customary in Massa- 

 chusetts to tax rural property on a 2/3 valuation. The yield tax then 

 is 14 cents for each dollar of final yield or thirty-three dollars and 

 sixty cents an acre, if $240 worth of timber is cut per acre. 

 The land tax is computed as follows : 



^^ 1000 



\ I. OS— I / 



or $19.11 an acre, which makes about 12 cents per $1 of final yield. 

 Again taking only 2/3 of this, or 8 cents and subtracting this from 

 the 14 cents yield tax leaves a final yield tax of 6 cents per dollar 

 of stumpage, to be paid at the end of the rotation or when the tim- 

 ber is cut. In this way the commission decided that a yield tax of 

 six per cent is a proper tax to charge. 



