262 MISC. PUBLICATION 218, U. 8S. DEPT. OF AGRICULTURE 
Practical evidence bearing upon the relation of taxation to the 
holding of timber investments and to the operation of large logging 
and lumbering enterprises was obtained from owners of timber prop- 
erties in Oregon and Washington. This region was selected because 
of its leadership in the extent of virgin timber in private ownership 
and in current lumber production. Detailed reports were called for, 
using two form statements, one for owners of blocks of timber which 
had been held as a reserve ’ supply or for investment, and one, which 
is of most interest in the present analysis, for active operators. These 
form statements, which were prepared with the advice of representa- 
tives of the lumber industry, were sent to 353 corporations and indi- 
viduals. Eighty-one of these returned answers, in 70 of which the 
data were usable. Several did not cover all of the timber blocks 
owned by the party making the report, and in such cases there was 
no check on the manner of selection. Otherwise these replies appar- 
ently afford a random sample of the industry and may therefore be 
considered representative. 
Practically all of the data on which this study is based were col- 
lected in 1928, and they therefore do not go beyond the last full year 
for which figures were then available, or 1927. While certain changes 
in the economic and tax situations in the Pacific Northwest have 
taken place since that time, it is believed that the material is still 
useful.* 
The data collected in this way include the amount of the net invest- 
ment in timber and timberland owned by the reporting operators at 
the end of 1922 and of 1927, calculated by deducting from the original 
cost of the tracts owned the total charges for timber depletion on a 
cost basis up to the close of the year in question. These figures were 
averaged in order to get an approximation of the average investment 
in timber and timberland for the period 1923 to 1927. The average 
investment thus obtained in round figures is $96,000,000. Since the 
appreciation in value over the original cost doubtless outweighs the 
small part of the investment which may fairly be allocated to land 
value, this average investment may be taken as a very conservative 
estimate of the average value of the timber owned during the period. 
Thus $96,000,000 may be considered as corresponding to Vp) in the 
above formula. The average annual taxes on these same properties 
for the same years are $1,410,000, which figure is Vor in the formula. 
It was impractical to determine the other carrying charges on timber 
and land for the operated properties, because they are included with 
the charges of the logging and manufacturing business. It was found, 
however, that 1,554,000 acres of nonoperated timber paid $261,500, 
or 17 cents per acre, for fire protection and administration. This, 
multiplied by the area in acres of the operated properties, 1,151,000, 
gives $196,000, which may be considered e in the formula. A 3-per- 
cent interest rate (the tax-free, risk-free rate used in other parts of 
this report) may be used, making interest $2,880,000 (Vop in the 
formula). The carrying charges, therefore, are as follows: 
Dollars Percent 
imtenrestaGyop) esses eo Nea ST PSE A a ee oe 2, 880, 000 64 
Ma KeSR AV (7, eee Se UL ORE ae bY cot Bh aee ls eS Ph eae AR 1, 410, 000 32 
Othersy (6): set hel eee eile Vi eee 2 le ee 196, COO + 
lB FES) AAG an FAR Ta a MRS Dogar cys ah so PL 4, 486, 000 100 
8 For a more detailed presentation of this material, refer to Progress Report 14. (See footnote 9 on p. 14.) 
