FOREST YIELD TAXES 29 



-rated percentage of the value of the timber harvested or as a flat rate 

 applied to a physical measure of the products cut. Mississippi is the 

 only State that uses the latter basis. The other yield-tax States 

 assess the tax as a percentage of stumpage value. 



In contrast, five of the six States which impose a general severance 

 or privilege tax on all forest products use the basis of flat rates applied 

 to physical volumes harvested. At the same time three of these. Ala- 

 bama, Louisiana, and Oregon, use the percent-of-value basis for the 

 yield tax on classified land. 



The reasons for using one basis for yield taxes and another for 

 severance taxes are not entirely clear. A possible explanation may 

 be the different fiscal purposes of the two taxes. The severance or 

 privilege tax is designed to provide additional revenues for State 

 functions. The yield tax is designed to collect the postponed tax 

 on timber at the time of cutting. Apparently the percent-of-value 

 method is considered the better measure of postponed taxes on timber. 



Neither basis of taxing is a good measure of postponed timber taxes 

 in a period of changing stumpage prices. If the yield tax in conjunc- 

 tion with the land Fax is set at a rate to equate total payments on land 

 and timber — whether classified or not — under assumed static price 

 conditions, a change in stumpage prices will destroy this balance. 

 Under conditions of rising prices such as have been experienced in 

 recent years the assessed value of timber on unclassified land would 

 increase, though the adjustment in valuation would lag behind price 

 changes. Under the flat-rate basis, timber harvested at higher prices 

 would not be taxed at any higher rates, and the postponed taxes might 

 not be recovered in full. Under the percent-of-value method, on the 

 other hand, the yield-tax payment would be based on current increased 

 stumpage prices, and the tax paid would tend to exceed the amount 

 that would have been paid on unclassified land whose assessed value 

 did not keep pace with its market value. 



Over an extended period of time rising stumpage prices may reflect- 

 either an increasing scarcity of timber, an increasing demand for 

 timber, or a change in the value of money. To the extent that stump- 

 age price increases are a reflection of decreasing purchasing power of 

 the dollar, costs of government are similarly increased. So if forest 

 land is to bear its equitable share of the cost of government service the 

 percent-of-value basis of taxing timber yields will accomplish this 

 purpose better than the flat-rate tax applied to physical volumes. 



Assessment of the tax. — Assessment of the yield tax consists of two 

 steps : One is to measure the physical quantities harvested and the 

 other is to apply values or rates to these quantities. 



The general practice is for the owner to make a certified report of 

 the physical volumes harvested and subject to taxation. Provision is 

 generally made for a check on reported volumes by either county or 

 State officials if the accuracy of the report is questioned. In Minne- 

 sota this practice is varied by a provision calling for a scale measure 

 of timber cut. to be made under the direction of the county board. 



In assessing the value of the forest products harvested there is 

 greater variation among the States. In Alabama and Connecticut 

 owners report the value as well as the volume of their harvest. In Mis- 

 sissippi no valuation is required since the tax is based on volume. 



In four States the value of products harvested is set by local officials. 



