264 MISC. PUBLICATION 218, U. 8. DEPT. OF AGRICULTURE 
gether. Cases such as this would rarely occur at a time when general 
conditions were favorable to the holding of merchantable timber. 
Ordinarily, if timber values are expected to increase at a rate faster 
than the sum of interest, taxes, and other carrying charges, most own- 
ers would find some means of Taising the annual carrying charges 
rather than to lose money by premature cutting. On the other hand, 
if timber values fail to promise an increase at a rate greater than 
interest and other carrying charges (not including taxes) then it would 
be profitable to cut even though there were no taxes at all, and in 
that case it should be recognized that, even though owners may appear 
to be cutting to get money for payment of taxes, the real reason for 
cutting is the unfavorable prospect of future values and not the burden 
of taxation. 
In the second place, there doubtless is a psychological difference 
between interest which must be paid to creditors and interest which 
is merely calculated upon the value of the owner’s capital. The timber 
owner, seeing an unfavorable future, and pressed by his creditors for 
payment of interest on his debts, may easily be led by the pressing 
nature of such demands to give less weight to interest on his own 
capital than its true economic importance would require. In like 
manner, taxes which are a present obligation, carrying threat of loss 
of his property, may carry an importance in the owner’s eyes out of 
proportion to their true importance as compared with interest on his 
own capital. In this way the effect of interest on borrowed capital 
may have a disproportionate psychological importance and, especially 
in times of economic depression, taxation may attain to an importance 
in the eyes of certain owners beyond what its relative position would 
ordinarily justify. 
In the third place, there is a psychological resistance to realizing a 
loss which sometimes causes an investor to retain a property against 
his own best interest. Thus the amount of the original investment 
and subsequent cost may in practice sometimes be a factor that is 
considered in deciding whether to cut or hold timber. 
It should also be noted that where an owner has timber in two or 
more taxing jurisdictions with different tax rates, he will frequently 
choose, if other things are equal, to cut first in that district with the 
highest tax rate. This was brought out in the testimony of R. R. 
Chaffee, of the Wheeler & Dusenbury Lumber Co., Endeavor, Pa., 
who stated to the Senate Reforestation Committee in 1923 (67th 
Cong., 4th sess., hearing pursuant to S. Res. 398, p. 136): 
Our taxes have in a measure regulated our cutting policy to the extent of with- 
drawing operations in one county or township and increasing them in another as 
is fluctuations of the assessors increased taxes here and maybe decreased them 
ere. 
Taxation thus becomes a real influence in hastening cutting in a 
particular district, although this is only the result of choice between 
districts and without effect upon the total cutting in the State or 
region. 
The present situation in the lumber industry is in conformity with 
the foregoing facts and principles. The key lies chiefly in the judg- 
ment as to the future of stumpage values. In the past lumbermen 
have generally assumed that the increase in stumpage values would 
at least keep pace with carrying charges. This assumption, in recent 
years (1923-33), they have found was not being fulfilled. The follow- 
