46 MISC. PUBLICATION 218, U. S. DEPT. OF AGRICULTURE 
preference to the latter; but if a property tax is imposed, the tax 
ratio in the case of the deferred-yield use may be twice as great (say 
40 percent) as in the other case (20 percent). The value for the 
deferred-yield use is, under these circumstances, reduced to $3; and 
‘for the annual-yield use, to $3.20. The annual- yield use now has 
the advantage over the deferred yield, and wiil be chosen in prefer- 
ence to the other. The tax burden as measured by the tax ratio 
has here so shifted the margin for deferred yield that certain areas, 
economically suited for such use if the property tax could be abolished, 
are no longer suitable. From its very nature, the property tax 
favors a use which yields an early income. Of course this effect is 
controlling only in the case of those properties which are on the 
margin between use for a deferred yield and use for an annual return. 
The property tax in these marginal cases throws the balance to the 
side of an annual return. 
SUMMARY 
From the examples given, it may readily be concluded that the 
property tax as measured by. tax ratios deals unequally with different 
types of investment. Only in the case of an investment producing a 
regular annual net income equal to the interest on the capital is the 
tax ratio the same as under an income tax with corresponding rate, 
as illustrated by the 25-percent ratio in the case of the first brother. 
When capital is so employed that its income is deferred, thereby caus- 
ing a gradual increase in the value of the capital, the property tax 
takes a larger toll of the capitalized future incomes, as illustrated by 
the 36.8-percent burden in the case of the second brother in the 
example. Finally those investments which, by securing an income 
ereater than the interest, gradually exhaust the capital are favored 
by the property tax. In the case of the third brother, the present 
worth of all his taxes was only 2.5 percent of the capitalized incomes. 
If taxes are fully capitalized at the time of making the investment, 
the inequalities of tax ratio are so taken into account that equal sums 
of money will purchase investments of equal value in the three types 
of income; and there will be no discrimination between the three 
owners so long as the tax rate remains unchanged. If taxes are at 
the beginning not wholly capitalized, the value of the capital for each 
brother will eventually be reduced by later capitalization, but the 
reduction in the case of the second brother will be the largest. In 
any case, the uncertainty of future tax burdens is of far greater 
moment in the case of the second brother than in the case of either 
of the other two. Finally, the number of properties which are super- 
marginal for deferred-yield use (second brother) is reduced by the 
presence of the property tax. Here, in a nutshell, is the theoretical 
indictment of the property tax in its effect on different types of income 
streams. 
Insofar as the inequities are between owners only and do not affect 
the use of land or the practice of forestry, they are of minor importance 
in this investigation. In the marginal cases, however, these inequities 
do affect the use of land and the practice of forestry, and it is to these 
marginal cases that this part is especially directed. The marginal 
cases are, in general, those in which the owners must begin from a 
bare-land condition or from a condition which approaches “bare land. 
The tax problem is far less acute in the case of owners who start from 
