FOREST TAXATION IN THE UNITED STATES 559 
definite prospects for specific uses. When based on prospective use 
of the land for forestry, forest-land value is identical with the ‘‘soil- 
expectation value”’ of forest finance, provided that the cost of regen- 
eration in the customary formula is interpreted to mean the usual 
cost actually incurred in the management of forests of the kind under 
consideration, rather than a theoretical cost starting with land that 
has been denuded. The formula referred to is as follows: 
¥—C-X—eG FPR 
foes oan Gee emer to 
in which L is the land value; Y, the gross yield or stumpage value 
realized at the end of each rotation; C, the cost of regeneration incurred 
at the beginning of each rotation; X, the total amount of the taxes 
accumulated to the end of the rotation at the established rate of pure 
interest, p; e, the average annual expense incurred each year for 
administration, protection, and cultural operations; and n, the 
number of years of the rotation. 
A more usual form of the soil expectation value formula is: 
Y—C (1+p)"—e Utero 
og (-+p)*—1 
where e includes taxes as well as other annual expenses. This is the same as the 
preceding formula except that here taxes are treated as an average annual sum, 
and the term —C is transferred to the numerator of the fraction. The form used 
in this report is preferred because it permits taking proper account of the property 
tax, because the numerator of the fraction is an expression of the entire net income 
from the forest investment, and because it indicates directly that the value of the 
land is the capitalization of that income received every n years less the cost of 
regeneration incurred every n years. 
If forest-land value is defined in accordance with the above-de- 
scribed concept, it is equivalent to bare land (in the strictest sense of 
land without possibility of natural regeneration) only when applied 
to a forest in which it is usual to clear-cut the mature trees and replace 
them by planting. When applied to forests which are ordinarily 
regenerated by natural means, the kind that prevail in this country, 
land value measures the value of the site together with the capacity 
of the forest to reproduce itself. It is equivalent to the value of the 
forest property in its existing condition less the value of the trees, 
if the value of the trees 1s taken to include only merchantable timber 
and any smaller trees that have passed the regeneration stage and are 
therefore not included in the reproductive capacity of the forest. 
By ascribing to the land the entire value that a property would have 
in a cut-over condition, all nonforest possibilities, such as prospective 
mineral or agricultural use, are regarded as contributing to the land 
value. The same is true of uses which are compatible with timber 
growing, such as hunting and fishing and enjoyment of recreation and 
scenery. 
FIVE PLANS CONSIDERED 
Five plans based upon modification of the tax system with special 
reference to forests have been considered worthy of investigation and 
of treatment in this report. The first plan discussed is the yield tax, 
