FOREST TAXATION IN THE UNITED STATES 275 
less degree than any of the other methods, since the period of waiting 
for the realization of income is usually less, the possibility of sustained 
yield much closer, and the costs usually much less. Where the prop- 
erty contains sufficient virgin or old second-growth timber to permit 
the realization of a regular annual income from the start, a properly 
administered property tax would offer no special obstacle to forestry 
as against other land uses. 
The farm wood-lot forests in this country partake of the nature of a 
selectively logged forest, many of them now approaching sustained 
yield. They are consequently affected by taxation in the same man- 
ner as are selective-logging enterprises. 
NATURE OF THE ENTERPRISE AND RESULTS OF TAXATION 
What makes forest taxation under the property tax a special prob- 
lem is the peculiar nature of the timber-growing enterprise. Most 
forms of wealth yield income more or less regularly by the year; the 
ordinary cycle of revenues and expenditures is normally completed 
within each year. The annual demand for tax payment is thus in 
harmony with the annual receipt of income. If all American forests 
were established upon the basis of a regular annual sustained yield, 
the practical problem of the property tax would not be so serious, 
since there would then be an annual income from which to pay the 
annual taxes. As a matter of fact, the cycle of forest revenues and 
expenditures is not generally a regular annual one at present. Income 
may be extremely irregular, large in some years, small or entirely 
lacking in other years; the years in which there is no income are apt 
to be far more numerous than those in which income appears; capital 
may be tied up in land, trees, and expenses for many years before 
any income appears. ‘The requirement of annual tax payments is not 
in harmony with such irregular or long deferred income. Even a 
perfectly drawn and perfectly administered annual property tax 
would work injustice upon forest wealth yielding such irregular or 
deferred income. This fact has been demonstrated in the discussion 
of the theory of the property tax as applied to forests (part 3). As 
has also been demonstrated in the same discussion, the overburdening 
of a deferred-yield forest as compared with an annual sustained-yield 
forest is greater the longer the period of deferment and the higher the 
taxes. This discrimination against deferred-yield forests is measured 
by a comparison of tax ratios. 
The property tax exerts a direct influence on the decisions of 
owners as to whether or not to practice forestry, by determining 
what areas are or are not supermarginal for a deferred-yield use. 
An ulustration used in a previous discussion (pt. 3) will bear repeating 
here. If the value of a certain bare-land property, before taxes, is 
$5 per acre for a deferred yield (like forestry) and $4 for some use 
(like grazing) which will yield an annual return, the former use will 
be chosen in preference to the latter. Butif a property tax is imposed, 
the tax ratio in the case of the deferred-yield use may be twice as 
great (say 40 percent; a very common tax ratio among forests) as in 
the other case (say 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 an advantage 
over the deferred yield and will be chosen in preference to the latter. 
Taxes have here so shifted the margin for deferred yield that certain 
