FOREST TAXATION IN THE UNITED STATES 573 
of the yield-tax plan would find favor with those who would prefer 
not to disturb the favorable tax situation (as compared with a theo- 
retically equivalent income tax or yield tax) which virgin forests 
enjoy under the property tax while being either destructively cut or 
converted to a sustained-yield basis through the reduction of wood 
capital. Against this modification is the consideration that a yield- 
tax plan applicable to old-growth and other merchantable forests 
would make it less costly for owners to withhold timber from untimely 
liquidation and maintain a reserve for future needs. 
CONCLUSIONS 
The yield-tax plan would attack directly the major defects of the 
property tax system as applied to forests. It would apply the income 
tax principle, ‘modified so as to be of practical application, to the 
taxation of forest properties. It would permit reduction of the tax 
cost of establishing sustained-yield forests, either from bare land or 
from young stands, materially below the cost under the property 
tax. Furthermore, its application would relieve the owner of a de- 
ferred-yield forest from the necessity of financing tax payments in 
advance of income, so far as taxes on the timber were concerned. The 
directness with which these important objectives would be accom- 
plished constitutes the chief merit of the plan. 
An incidental advantage of the yield-tax plan is that the owner 
would be relieved of carrying the entire risk of loss by fire or other 
causes, which is an especially serious item during the process of build- 
ing up a sustained-yield forest. The owner and the government 
would share the actual risk in each case in proportion to their respec- 
tive equities, and the tax would be automatically adjusted to experi- 
ence in each forest. There would be no yield tax to pay on timber that 
was destroyed by fire or other causes. 
The yield-tax plan, while enjoying the above-mentioned advan- 
tages, is subject to serious drawbacks. One of the most important 
is that the yield tax, like all taxes based on receipt of income, would 
be variable in the amount of revenue which it would produce. In 
counties or smaller districts where operated forest properties pre- 
dominate in the tax base, the irregularity of public revenues from a 
mere substitution of this tax for the property tax without other 
changes in the revenue system would be likely to be embarrassing 
at any time and would be very serious in years of abnormally low 
cut. In counties where the proportion of old-growth timber not under 
operation was exceptionally high, the immediate loss in tax revenue 
would be material. The same would be true of those timbered 
counties where the property-tax rate was exceptionally high, provided 
the yield-tax rate was uniform for the State based on a State-wide 
average property tax rate. Conceivably, years of abnormally low 
cut and consequent deficiency in revenue might be provided for by 
reserves laid aside from excess revenues in more favorable years, 
but common experience with county governments does not inspire 
confidence that county officials could be relied upon to build up and 
administer such reserves so that the desired stability in public income 
would be achieved. 
The substitution of the yield tax for the present property tax on 
timber would cause, even in normal years, an immediate dislocation 
of local finance in those communities where timber formed an impor- 
