FOREST TAXATION IN THE UNITED STATES 583 
be found in the future, properties should continue to be assessed and 
taxed on their land value. ‘There are also localities in which forest 
properties contain considerable elements of value not arising from 
their timber-producing capacity, such as recreational, residential, or 
mineral uses. ‘These elements of value should naturally be included 
in the land value and taxed like other property in general. ‘To meet 
these and other similar conditions the adjustment of the tax base 
brought about by deducting each year the accumulated adjusted 
value increment should not be permitted to bring the tax base 
below the land value. The application of this method of taxation 
therefore requires that the land value be distinguished from the 
timber value in the assessment of all forest property. 
In seeking a modification of the property tax which will adjust it 
to the peculiarities of forest property, it is not necessary to attempt 
any correction of past maladjustments. The adjusted property tax 
should commence with things as they are when it goes legally into 
effect, seeking only to correct the future inequalities that would other- 
wise result from the operation of the property tax. This principle is 
theoretically sound, and in addition it recognizes the obvious fact that 
compensation for past inequalities is impracticable. 
THE PLAN, STATED AND ILLUSTRATED 
A practical plan for accomplishing this adjustment—which may be 
called the ‘‘adjusted property tax’’—1is proposed, as follows: 
The forest will continue to be assessed in the usual manner, but 
from the assessed value there will be deducted the calculated adjusted 
value increment accumulated from the taking effect of the plan to date. 
It will be assumed that during any given year such increment is 
destined to accrue. Its constructive amount will be determined by 
(1) calculating 1 year’s interest on the value of the forest at the 
beginning of the year, (2) adding the taxes paid during the year, and 
(3) subtracting the income received during the year. The value at 
the beginning of the year will be assumed to be the assessed value. 
The rate of interest will be set in the law, being the closest approxi- 
mation to the market rate of pure interest. The risk element, com- 
monly called upon in business calculations to justify a higher rate, 
should have been allowed for in the estimate of the expected yields 
and costs, upon which the present value is based. The determination 
of the interest rate is a question for the judgment of economists. 
They would be guided by the interest rates paid by the most stable 
governments on long-term borrowings through the medium of bonds 
or other securities which are exempt from all taxes except inheritance 
taxes and which carry no other special privilege. This rate would 
be subject to change if there should be a material change from the 
rate then currently in use under the plan. For the purpo-e of illus- 
tration, it is assumed that the rate set will be 3 percent. In any given 
year the deduction will be the accumulated adjusted value increment 
up to the end of the next preceding year. Whenever the calculation 
produces a negative deduction, such deduction will be disregarded, 
thus leaving the regular assessed value unchanged. 
For example, suppose the proposed plan goes into effect on January 
1, 1933. <A given forest was assessed on January 1, 1932, for $1,000. 
The taxes on this valuation, paid in 1932, were $25. During the year 
a yleld of $10 was realized. On January 1, 1933, the forest was 
