276 MISC. PUBLICATION 218, U. S. DEPT. OF AGRICULTURE 
areas, economically suited for forestry 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. 
The property tax, when it involves overassessment of cut-over 
land, encourages speculation in, or abandonment of, such land at the 
expense of forest growing. This effect may be illustrated as follows: 
Assume a wild, unimproved property which will yield $100 an acre 
in merchantable timber at the end of 50 years. Assume also that in 
addition to a minimum fire-protection cost of 2 cents per year, the 
owner must pay an average of 3 cents per year for cultural operations 
and additional fire protection to insure the realization of this yield. 
Assume furthermore that there is 1 chance in 10 that the owner will 
be able to sell the property for a higher use than forestry within the 
next 20 years, and that he will get $100 an acre if he does so sell it. 
For simplicity in calculation, assume that this possibility will be 
realized, if at all, at the end of the tenth year. If the property is 
assessed at the average level of assessment, it might have to pay over 
the 50-year period an average annual tax of $0.10 an acre. The owner 
makes something like the following mental! calculation: 
One hundred dollars at the end of 50 years means $8.72 now, discounting at 
5 percent, while taxes and other expenses cut off $2.74 from this amount, leaving 
$5.98 net. The speculative alternative, on the other hand, is the equivalent of 
a 1 to 10 chance for $100, or $10 at the end of 10 years. The discount of this 
chance is $6.14 gross or $5.37 net after deducting the tax cost of $0.77. The 
forestry alternative seems to be slightly more profitable for me than does the 
alternative of speculating on a higher use. I will try forestry. 
But suppose that wild, unimproved land is so overassessed in 
relation to other property that the annual tax burden is $0.30 rather 
than $0.10 an acre. The owner then makes his mental calculation 
as follows: 
For a term of 50 years, $0.35 annually is worth $6.39 now, while for a term of 
10 years, $0.30 annually is worth $2.32 now. The forestry use is therefore worth 
only $2.33 net with this $0.30 tax, while the speculative use is worth $3.82. The 
speculation on a higher use than forestry is, under these os conditions, more 
profitable to me than is forestry. 
In practice, very few owners go through any such mathematical 
calculation as that outlined above, but their common sense comes to 
much the same result. Common sense demands that the more ex- 
pensive an investment is to carry, the quicker ought a return to be 
expected from it. Hence overassessment of cut-over land frequently 
turns the scales against forestry and in favor of some possible shorter 
term use. 
If overassessment were so pronounced in the example under dis- 
cussion that the annual tax burden would be $0.80 an acre, all value— 
even for the gambling use—would disappear from the land, and 
abandonment through tax delinquency would remain the only 
economic outlook for the owner. 
CONCLUSIONS 
In the areas studied, the average taxes on forests as a class were 
found to range from $0.06 to $1.08 per acre. In these same areas, 
the average taxes on all other rural real estate taken together ranged 
from $0.06 to $6.91 per acre. These differences refiect in large part 
differences in average value. 
