FOREST TAXATION IN THE UNITED STATES 47 
mature timber or from second growth well advanced toward maturity. 
In accordance with the practice of physicians, the theoretical diagnosis 
in this part is concentrated upon the ailments of the patient rather 
than upon his well points. Incidentally, even those who start from a 
favorable present condition must eventually pass through a cut-over- 
land stage on parts of their forests or, where clear cutting is not prac- 
tised, a stage when parts of their forests can be cut over with a mini- 
mum sacrifice of values that depend on continuing the forest use, and 
at such time their decisions as to investment in a future crop will be 
influenced by the tax burden. 
The theoretical discrimination of the property tax against deferred- 
yield forests may be expressed in terms of the necessity of paying taxes 
in advance of the receipt of income. The annual recurrence of the 
ordinary business income is so much regarded as a matter of course 
that people have generally failed to appreciate the profound signifi- 
cance of the annual character of the property tax. If the property 
tax were so modified that it fell due only when income was obtained 
and in proportion to the income received, its correspondence to the 
income tax would be complete. Thus, in the case of the second brother 
if no property tax were levied during the 17-year period of waiting, 
and then a 1-percent tax were imposed on the capital for as long as an 
equal annual income were received, the situation would-be exactly the 
same as under a 25-percent income tax. The adverse effects inherent 
in the property tax as applied to deferred-vield properties are hence 
due to the fact that the cycle of governmental demands is shorter 
than the cycle of deferred-yield income. 
RELATION OF TAXES TO THE VALUE OF FOREST 
INVESTMENTS 
GENERAL STATEMENT 
The most important applications of the foregoing general analysis 
to forest investment and industry are obvious. (1) A deferred-yield 
forest is overburdened under the property tax as compared with prop- 
erty yielding a regular annual income. The excess burden is greater 
the longer the period of deferment. In particular this applies to 
second-erowth forests not yielding a current income and to old-growth 
forests held for future disposition. Periodic sustained-yield forests in 
which the income cycle is longer than 1 year are also overburdened, 
but the amount of excess burden becomes less serious as the income 
cycle becomes relatively short; it would not be a serious matter with 
a cycle of about 5 years or less. (2) An old-growth forest which is 
being converted to sustained yield (necessitating reduction in timber 
value) or which is being destructively exploited receives favorable 
treatment from the property tax. (3) A forest with annual sustained 
yield is treated by the property tax on a basis of equality with property 
generally; in other words, taxes take no larger portion of the owner’s 
income than they would if he had invested his capital in some sus- 
tained-yield enterprise other than forestry. 
The third conclusion with reference to annual sustained-yield forests 
is subject to the qualification that the standard of comparison is an 
income tax levied on both tangible and intangible income. However, 
the ordinary income tax is applied only to money income or other 
