FOREST YIELD TAXES 3 



The main strength of the argument against the ad valorem property 

 tax has been directed to its discouragement of growing timber crops. 

 The assumption that the owner would have to wait many years before 

 he received any income from his forest property was a natural one 

 because our first thinking in forestry was in terms of plantations. 

 This argument also has lost some of its force with the adoption of 

 forest practices in the form of frequent light cuts and the frequent 

 realization of harvest incomes. Once a forest property is being man- 

 aged on a sustained-yield basis it makes little difference whether 

 taxes are paid on the assessed value of the land and timber or on the 

 value of the crop harvested, if the two tax payments are equal in 

 amount. The effect of the time factor has largely disappeared. 



In spite of the great progress in forestry in recent years not many 

 holdings are actually on a sustained-yield basis today. Most of the 

 owners who are serious about forestry are working toward sustained 

 yield, but most of their stands are still in the period of transition. 

 This may be one of the most difficult financial periods for a forestry 

 operation. 



Investment funds are needed to block up areas of growing stock, to 

 plant when necessary, or to modernize manufacturing plants. Work- 

 ing capital is needed to protect timber and to introduce the management 

 practices called for by a plan of continuous operation. Income may 

 decline if the annual harvest of timber has to be reduced to the allowable 

 cut for sustained yield or if manufacturing plants have to be operated 

 at less than capacity because of this reduced supply of raw material. 

 The existence or, more important, the prospect of high annual taxes on 

 forest land can be a factor important enough to induce the owner to 

 continue a policy of liquidation rather than attempt to achieve a perma- 

 nent operation. 



A realistic appraisal of the situation leads to the conclusion that 

 property taxes, though they may have hastened liquidation and dis- 

 couraged reforestation in the past, have not been an important obstacle 

 to forestry in the past few years. Though costs of local governments 

 have increased, revenue in the form of aid from the States has increased 

 much more rapidly and in 1946 only half of the total county revenues 

 came from taxes. Twenty-three States now collect little or no general 

 property taxes, and property taxes make up only 4 percent of total State 

 collections, so the pressure to increase property taxes has not been 

 great. At the same time individual incomes have been at a high level 

 and taxes have been met without much real trouble. Only in certain 

 areas and in rare individual cases are property taxes an incentive to 

 liquidation or an obstacle to the practice of forestry. 



Happy as the present situation is, it may not continue indefinitely. 

 The cost of services provided by local governments is growing with in- 

 creasing population and a higher level of living. And if the level of 

 industrial activity and national income should slump from its present 

 high point, if State aid supported by State sales and income taxes 

 should be reduced, and if the incomes of individual taxpayers should 

 decline, the burden of property taxes might once again be heavy enough 

 to discourage the practice of forestry on many holdings. These are not 

 changes to be welcomed, but the possibility of their occurrence cannot 

 be ignored. 



