FOREST TAXATION IN THE UNITED STATES 525 
While all property is subject to the hazard of unequal assessment, 
investment in forest growing, where it is necessary to start with a 
forest in which there is a preponderance of recently cut-over land, is 
in a peculiarly dangerous position, because of the high proportion of 
the growing cost which is represented by taxes and because of the 
difficulty of withdrawing from the investment without loss until such 
times as the individual stands or trees reach sizes for which there is a 
profitable market. It is true that uncertainty as to the burden of 
future taxes arises in part from inability to predict what may be the 
future costs of government and what contributions may be obtained 
from other classes of property and other sources of revenue, but it 
results also from the arbitrary powers assumed by the assessors and 
the possibility—or even probability—of faulty or unlawful assess- 
ments. It is in the case of cut-over land or young timber that the 
opportunities for arbitrary and illegal assessment are greatest, and it 
is here that one finds, as a matter of fact, the most numerous and 
conspicuous examples of arbitrary discrimination and actual or rela- 
tive overassessment. As timber becomes older, its value is more 
easily checked. Thus the chance of overassessment gradually 
diminishes and the opportunity for arbitrary action by the assessor 
becomes less. 
INHERENT NATURE OF THE PROPERTY TAX 
Forests suffer not only from the property tax administration, but 
also from the inherent nature of the property tax itself. They are 
thus doubly hit. Even a perfect administration would not remove 
the inherent defects. This matter has been developed previously 
in part 3. Itis sufficient at this point merely to summarize this theo- 
retical analysis. The reader is reminded that, in this theoretical 
analysis, the technical terms employed (such as capital, income, net 
income, value, etc.) relate to the concepts of economic theory, which 
in certain cases are different from the terminology of business account- 
ng. These terms have been precisely defined in part 3, pages 39 
and 48. 
It has been demonstrated that the property tax takes a larger por- 
tion of the capitalized future net income from an investment whose 
income is deferred than from a capital instrument yielding a regular 
annual income equal to the interest on the capital. Thus a deferred- 
yield forest is overburdened under the property tax as compared with 
property yielding such regular annual income. The excess burden is 
greater the longer the period of deferment. This applies in particular 
to second-growth forests not yielding a current income and to old- 
growth forests held for future disposition. Periodic sustained-yield 
forests, in which the income cycle (period between receipt of principal 
incomes) i is longer than 1 year, are overburdened, but the amount of 
excess burden is not serious if the income cycle is relatively short, 
say up to 4 or 5 years. 
It has also been demonstrated that the property tax takes a smaller 
portion of the capitalized future net income from a capital instrument 
whose net income after taxes is greater than the interest, so that the 
capital is being exhausted, than from an investment yielding a regular 
annual net income after taxes equal to the interest on the capital. 
Thus an old-growth forest which is either being converted to sustained 
yield, necessitating a reduction in timber value, or which is being 
destructively exploited, receives favorable treatment from the 
property tax. 
