596 MISC. PUBLICATION 218, U. 8S. DEPT. OF AGRICULTURE 
Upon the receipt of income from timber and forest products, the 
owner would be required to pay a tax as a reimbursement to the 
State timber-tax fund for payments previously made by the fund on 
account of this property. This tax would be equal, except for the 
limitation previously mentioned, to the net total amount, without 
interest, which had been paid by the State on account of the timber 
tax. This amount would be the total of the amounts given in columns 
7 and 8. The limitation is that the current payment would not 
exceed a fixed portion, assumed to be 30 percent, of the current 
eross yield, based on the selling price or value of the products on 
the stump. This current payment to the State timber-tax fund 
made by the owner would be entered in column 9 at the end of the 
tax year, and would be payable directly to the State treasurer to be 
deposited by him in the State timber-tax fund. Any deferred timber 
tax to be carried over to succeeding years, calculated by adding the 
amounts in columns 7 and 8 and subtracting the amount in column 9, 
would be entered in column 10. Where the ownership consists of a 
number of parcels, the total payment recorded in column 9 would be 
allocated to the different parcels in proportion to the accumulated 
timber taxes charged against each (column 7 plus column 8), except 
that where all the merchantable timber on any parcel is removed the 
deferred tax liability against that parcel would be discharged before 
any allocation to the other parcels. 
An alternative procedure giving precisely the same results as that 
described above would require the payment of all timber taxes due 
from owners to the local tax collector who would then receive from the 
State timber-tax fund only the deferred portion of the timber tax levy 
of the current year. Accordingly, the State timber-tax fund would 
be entitled to receive only payments on account of taxes deferred in 
previous years. Thus the local tax collector would retain the smaller 
of the amounts in columns (7) and (9); any deficit in column (9) 
under column (7) would be paid by the State timber-tax fund to the 
local tax collector, and any surplus in column (9) over column (7) 
would go to the State timber-tax fund as a reimbursement for 
previous payments. a : 
The limiting rate, which would regulate the rapidity with which 
deferred taxes would be paid on receipt of income, should be high 
enough to cover the accumulated property taxes on timber (deferred 
timber taxes) under all but the most unfavorable conditions. This 
rate would vary in different States. It is believed that a proper 
rate would fall within a range of 20 to 40 percent. 
The above statement in regard to the range of the limiting rate is founded on 
two separate calculations, one for second-growth and one for old-growth timber. 
When the limiting rate becomes applicable, it obviously has the same effect as 
a yield tax under the ordinary yield-tax plan. The range of yield-tax rates 
which would impose the same tax burden as an income or net-yield tax at a rate 
equivalent to the property tax rate has been shown for second-growth forests 
managed on regular rotations andincome cycles in table 150, page 563. Ifproperty- 
tax rates do not exceed 1.5 percent, the largest corresponding yield-tax rate 
would be 28 percent. Taking the exceptional property tax rate of 2.5 percent 
as a maximum, the corresponding maximum yield-tax rate under the conditions 
assumed in table 150 would be 40 percent. If the maximum property tax rate 
in any State were 1 percent, based on actual value, the highest corresponding 
yield-tax rate, under the same conditions, would be 21 percent. Therefore it 
seems that in the case of second-growth forests, limiting rates of 20 to 40 percent, 
depending upon the maximum tax rates based on actual value, could safely be 
applied to the yield in order to regulate the rate of repayment of deferred property 
taxes on timber. 
