FOREST YIELD TAXES 49 



from yield-tax receipts. It has been suggested that a procedure be 

 established whereby Federal funds could be made available to the 

 States at low interest rates for the reimbursement of local government 

 units. The suggestion has not been developed but it has certain merit 

 inasmuch as the whole Nation is concerned with the problem of im- 

 proved forest practices and the economic conditions affecting the 

 commercial practice of forestry. 



The second situation under which total tax receipts over a long 

 period are reduced through operation of a yield-tax law is a more 

 difficut one to solve. It is a situation in which many government 

 units may find themselves in a period of rising prices and costs. 

 Though the rates of taxation originally established in the law were 

 designed to equal payments under the property tax, increased costs 

 of government, higher assessments, and higher tax rates may destroy 

 this balance. 



One alternative is to change the rates under the yield tax. This 

 would be highly undesirable. It presumably would be impossible if 

 the owner has entered into a contract with the State. Legally it 

 might not apply retroactively to areas previously classified and would 

 discriminate against new applicants. Repeal of the law and the enact- 

 ment of a new one with higher rates would be a breach of faith on the 

 part of the State. It would destroy confidence in the yield-tax law 

 and would remove the element of certainty so necessary to a long-range 

 forestry program. 



A second alternative is to let the local governments cope with the 

 problem individually. This also would be undesirable. The burden 

 would fall with unequal weight on the different local units. In the 

 areas where the problem is most serious opposition might develop to 

 further classification of forest land under an optional law, and pros- 

 pective applicants would be discriminated against if they were denied 

 classification. 



A third alternative is the reimbursement of local units for tax losses 

 on a permanent basis. This would require continued appropriations 

 from State funds and would mean that all other residents of the State 

 would contribute to the establishment of an economic condition favor- 

 able to forestry. This alternative has the advantage of maintaining 

 security of tax costs for the forest owner and of eliminating the rev- 

 enue losses to local government units. It has a possible disadvantage 

 in that it might not be politically expedient and that farming or indus- 

 trial areas would refuse to support appropriations for the benefit of 

 forested areas. If it can be made to work it is the best of the alterna- 

 tives. 



The yield-tax law should have popular support. — This may be the 

 most difficult requisite to achieve, but it is also one of the most impor- 

 tant. The other requisites may be impossible to meet if popular sup- 

 port is lacking. There may be some value in an optional law that is 

 opposed by its administrators, that is hamstrung by eligibility require- 

 ments, that establishes a tax disadvantage for classified lands, that 

 provides only a short period of certainty for the owner, and that makes 

 no provision for the stability of local government revenues, but the 

 value is hard to discern. Yet such laws are on the books — the results 

 of compromises made with opposing interests or a lack of understand- 

 ing of the real function of a yield-tax law. If these laws were first 



