FOREST TAXATION IN THE UNITED STATES 597 
In the case of irregular second-growth forests, where income is realized at 
uncertain intervals, the degree of income deferment will change from time to 
time, but is likely to be within the extreme assumptions for forests under regular 
management illustrated in table 150. Therefore the range of limiting rates of 
from 20 to 40 percent may be considered applicable to irregular as well as to 
regular second-growth forests. 
In the case of old-growth forests, it is theoretically possible to withhold timber 
from cutting long enough under the deferred timber-tax plan to make the accumu- 
lated timber taxes more than any stated percentage of the yield. The number 
of years required for a property tax at a number of different rates to equal a yield 
tax at rates of 20, 30, and 40 percent are shown in table 157. With a moderate 
property tax rate of 1 percent and a normal interest rate (net rate of interest 
after taxes) of 3 percent, the shortest period under the conditions assumed in 
table 157 required for the deferred timber tax to accumulate to 20 percent of the 
yleld would be 32 years. With an exceptionally high property tax rate of 2.5 
percent and a normal interest rate of 3 percent, the shortest period required 
under the same conditions for the deferred timber taxes to accumulate to 40 
percent of the yield would be 23 years. With a moderately high property tax 
rate of 14% percent and the same interest rate, the shortest period required for the 
deferred timber tax to accumulate to 30 percent of the yield would be 32 years. 
It is evident that in States with very moderate tax rates, where 1 percent of the 
actual value would be considered the maximum, timber would have to be with- 
held from cutting for a longer period than is ordinarily contemplated for private 
investment in order that the accumulated timber taxes should exceed a 20- 
percent limitation. Also it is clear that in States with a high tax rate up to an 
extreme of 2.5 percent of actual value, the same would be true for a 40-percent 
limitation. If the rate of return on the investment, based on its value at the 
beginning of the period with the addition of the assumed costs, should turn out 
to be only 2 percent, the shortest periods during which the timber taxes would 
accumulate to the limiting rate applied to the yield would be somewhat less. 
However, these figures indicate that a range for the limiting rate applied to current 
gross yield in order to regulate payment of deferred taxes should be from 20 to 
40 percent, depending on circumstances. The average figure of 30 percent would 
seem to be sufficient to protect the public interests in States where the property 
taxes are moderate, not exceeding 1% percent of actual value. 
TABLE 157.—Number of years required for a property tax on old-growth timber, 
accumulated without interest, to equal 20, 30, and 40 percent of the tember value ! 
Property tax rate, | Property tax rate, | Property tax rate, | Property tax rate, 
1 percent 1.5 percent 2 percent 2.5 percent 
Interest | Timber a a Y s 
rate value 
Case 1 Case 2 Case 1 Case 2 Case 1 Case 2 Case 1 Case 2 
Percent |Percent | Years Years Years Years Years Years Years Years 
20 26 23 16 17 12 9 9 
2 30 48 44 26 28 18 19 14 15 
2 40 84 81 39 43 26 28 20 21 
3 20 32 34 18 19 12 14 9 10 
3 30 81 90 32 34 21 22 15 16 
3 40 (2) (2) 56 62 32 35 23 24 
4 20 42 46 20 21 13 14 10 10 
4 30 (?) (?) 42 46 24 25 17 18 
4 40 (2) (2) (2) (2) 42 46 27 29 
1 Assumptions: Case 1 Case 2 
Late ENG ac alarsy eval hb Cop ROS ey peas wu al seas hs een 9 ay SO ul) eR Pe Ry Re, ERO ce ue 0 $20. 00 
MGA Vale eines a pearin Hk ey A CRN NC BRUCE CMe Laie un WY Oe ae WL hee 2. 00 
PASTUTATTAIEC XPOS Neuve ned Mes OBIT BLL RN ne WC ar Nee UES OSE et Oe Ce ES 2 10 .10 
Interest rate, p; property tax rate, 7; number of years, n; percent of timber value, gq. 
Formula: 
rC yr eb(ptn)L etrL\" ha eee rC rn et(ptnL | erry, 
DD D a(z+o+ Dp ) Jat (ee |= pp Pp d Pp 
The above formula was derived from the following: 
af + oyatyteetry) SEPP) 7] aro Ph ett nny[ SFO"=1 a]. 
The left member of this equation is g times the expression for the total timber value at the end of 7 years, 
assuming deferment to the nth year of taxes on the timber; the right member is the expression for taxes un- 
der the deferred timber tax (pt. 3, formula 13) less the tax on the land value. 
§ Accumulated property tax will never equal the indicated percentage of timber value. 
