FOREST TAXATION IN THE UNITED STATES 607 
EFFECT ON PUBLIC REVENUES 
The adoption of the differential timber tax plan would cause no 
sharp change in public revenues. In States where there is a large 
amount of old-growth timber, second growth is either not valued at 
all or is assessed at a very low figure. Therefore in those States the 
proposed change in taxing second-growth timber would have little 
immediate effect in changing the amount of tax revenue derived 
from that class of property. The loss in revenue from old-growth 
timber below what would have been provided by the unmodified 
property tax is limited to 5 percent per year by the gradual applica- 
tion of this plan during a transition period, as reeommended. The 
actual loss would be at a lower rate than 5 percent in all districts 
where part or all of the timber was being cut or where old-growth 
timber was increasing in value. 
In States where old-growth timber is not an important element in 
the tax base, it is also generally the rule that whatever value second- 
erowth timber may have is mostly overlooked by the assessor. The 
adoption of this plan might have no immediate adverse effect on local 
revenues, especially if it were accompanied by the improvements in 
assessment recommended in another section of this part. 
It is conceivable that, in some States where the use of this plan 
with a uniform reduction factor for second-growth and the remaining 
old-growth forests might be contemplated, this reduction in taxable 
value coming all at once would result in embarrassment to local reven- 
ues in certain communities. To avoid this result, the differential 
could be applied gradually, both to young growth and old growth, by 
increasing the reduction factor each year at the rate of 5 percent. 
This ratio has been selected for the same reason as in the case of the 
gradual application of the plan to old-growth forests during a transi- 
tion period. It is an approximation to the expected rate of value 
increment. This method of application would prevent any financial 
embarrassment. The loss in revenue, if any, would be gradual and 
would tend to be offset by the increase in the value of the growing 
forests. Such a graduated application would, of course, postpone 
eiving full relief from the present tax system and should not be adopted 
except under the above-mentioned conditions. 
It is not anticipated that there would be any serious embarrass- 
ment to local public finances at the end of the transition period when 
the separate classification of old-growth timber would cease, sinve 
timber so classified would no longer be likely to form an important 
part of the tax base. However, if there were danger of such financial 
embarrassment, it could be overcome by making the change to the 
second-growth reduction factor gradually at a rate increasing 5 per- 
cent a year. Here again the rate of graduation is the rough approxi- 
mation to the expected rate of value increment. 
The precise ultimate effects of this plan on public revenues are 
difficult to forecast. It is reasonable to anticipate, however, that 
progress in sound forest management on private lands, partly as a 
result of the encouragement which this plan would offer, might 
eventually result in sufficient increase in taxable growing stock on 
forest lands to afford more tax revenue than if the property tax had 
been retained. 
