616 MISC. PUBLICATION 218, U. 8. DEPT. OF AGRICULTURE 
at the end of the year. All incomes are treated as occurring at the 
end of the year with income and yield taxes payable at that time. 
The income tax is calculated on the basis of net income before interest 
and taxes; the yield tax is a combination of a gross income tax and a 
land tax at the property-tax rate. In all cases, the trees are marketed 
at the time of financial maturity. 
With the above explanation, the figures given in tables 159 to 162 
may be interpreted. The immature-timber exemption plan evidently 
offers the most favorable results from the standpoint of the forest 
owner, and the property tax the least favorable. If the income (net 
yield) tax be taken as the standard of reasonable forest taxation, from 
the public as well as from the forest owner’s point of view, immature- 
timber exemption produces less revenue than it should and the 
property tax more. Thus the tax ratio, or fraction of the tax-free 
value taken by taxes, is high for the property tax and low with 
immature-timber exemption. In forest A, for example, when the 
property tax rate is 1 percent, the tax ratio under the property tax 
is 44 percent; with immature-timber exemption it is 21 percent 
(tables 159 and 161). Under the income tax, on the other hand, the 
tax ratio is about midway between these two extremes, or 31 percent. 
It is also evident (tables 159 and 161) that under the immature- 
timber exemption plan the tax ratio for an even-aged forest would 
remain constant regardless of the length of the rotation. In such a 
forest the tax burden under this plan, while less than that under any 
other, remains substantial, because the land value is a large part of 
the total forest value in the early stages of the rotation, and the taxes 
on this value accumulate with interest until charged to income at the 
end of the rotation. On the other hand, when this plan is applied to 
an uneven-aged forest (tables 160 and 162), the tax ratio diminishes 
as the income cycle is shortened, because the land value becomes a 
relatively smaller part of the total forest value the shorter the income 
cycle, and the taxes on this value accumulate for a shorter time. 
As measured by tax ratios in the hypothetical forests under con- 
sideration, the yield-tax plan gives a variable tax burden compared 
with that of an income or net-yield tax. When the yield-tax rate 
equals 10 times the corresponding property-tax rate, this burden is 
greater than that of an income tax in the case of even-aged forests of 
short rotation (table 159, forests A and B), about the same in the 
case of even-aged forests of somewhat longer rotation (table 159, 
forests E and F), and less in the case of forests managed on a 60-year 
rotation with income cycles of 5 to 15 years (table 160). The longer 
the rotation the less the importance of the land element in the tax 
base, and therefore the lower becomes the relative tax burden under 
the yield-tax plan, which includes a land tax. Of course, the entire 
level of the yield-tax burden could be changed by varying the rate 
from the assumed standard of 10 times the property tax rate. 
The adjusted property tax gives results identical to those given by 
the income tax under the assumptions which have been made in pre- 
paring these tables. Precisely the same results would not be expected 
in actual practice. 
The tax ratios under the income tax and adjusted property tax 
increase slightly the longer the income cycle. The income tax allows, 
for the purpose of computing taxable income, a deduction from oToss 
income for annual expenses only and not for interest on those expenses, 
