Too much emphasis is sometimes put on taxes and pro- 

 teccion costs as the causes for liquidation ot private hold- 

 ings. Actually the most important contributing factor 

 is probably the fact that 1 dollar a quarter of a century 

 hence is worth only 48 cents today at an interest rate of 

 3 percent. The fire-protection and tax burdens might be 

 considerably lightened in certain instances without materi- 

 ally increasing the attractivemess ot permanent private 

 forestry. This can be shown by following through what 

 may be regarded as a typical case in northern Idaho. For 

 simplicity, an area of 200 acres has been chosen in the 

 following assumed situation. In actual practice the 

 inanagement unit would probably be 100 or 1,000 times 

 as large. The assumptions as to yields, revenues, and 

 expenses are as follows: 



The property: 



Total acreage acres . 200 



Stands ot secondary species (nonrevenue producing) . . .do. 80 



Young western white pine stands, I to 80 years old. .do. 70 



Western white pine saw-timber stands 120 years and 



older acres . 50 



Volumeper acre of western white pine in these saw-timber 



stands M board feet . 12 



Total annual cut of western white pine for sustained 



yield (120-vear rotation) before reducing for fire 



losses M board feet. 12 



Revenue: 



Case No. 1 : Value of western white pine stumpage per M 



board feet $S 



Total revenue ($60) minus 6 percent for fire losses $56.40 



Case No. 2: Value of western white pine stumpage per M 



board feet $7 



Total revenue ($84) minus 6 percent for fire losses $79 



Expenses: 



Taxes per M board feet of western white pine saw timber . $0.05 

 Taxes per acre under reforestation law (applied to all area 



except western white pine saw-timber stands) $0,034 



Yield tax when young stands classified under reforestation 



law are logged percent. 12V{. 



Fire-control costs per acre $0.10 



Administration costs per acre $0.01 



Stand-improvement costs per M board feet of western 



white pine cut $1 



In this case it will be noted that the yield of western 

 white pine is much lower than in the Davis examples. A 

 yield of 12 M board feet of western white pine per acre is, 

 however, much nearer average for northern Idaho on the 

 basis of the Forest-Survey standards. For the purpose 

 of comparison, calculations were made on the assumptions 

 that the western white pine could be sold (1) for ?5 per M 

 board feet and (2) for $~. 



The first calculation is founded on the following con- 

 ditions — sustained-yield operation; a 120-year rotation; a 

 1-cut plan (logging each acre once every 120 years); the 

 present system of taxation; and no relief from the burden 

 of fire costs. Costs and revenues would be constant 

 except for taxes. The owner would very likely classify 

 all of his area not containing western white pine saw 

 timber under the reforestation law. As quickly as the 

 present saw-timber land is logged, it would be classified 



also. Thus, the taxes would steadily decline during 

 the first 50-year period, advance in the fifty-first year 

 when the first yield tax is paid, and remain at that 

 level thereafter. If the anticipated net returns in this 

 case are discounted to the present at 3 percent interest, 

 the present values per loggable acre are: 



$5 stumpage $0.07 



$7 stumpage 6.17 



It has been pointed out that the reforestation law fails 

 to meet the real tax problem in that it does not relieve the 

 pressure of liquidation on the timber which is now mer- 

 chantable. Since no detailed analysis has been made of 

 the tax situation in Idaho, it is impossible to say what 

 modifications of existing procedure will best serve the 

 purpose ot relieving this pressure. ^^ If, however, this 

 situation were met by modifying the reforestation law to 

 include all saw-timber stands cut on a sustained-yield 

 basis, the burden of taxes would be lightened and the 

 value ot the property so increased that the present values 

 per loggable acre would be: 



$5 stumpage $2.40 



$7 stumpage 7.90 



So tar in these two cases, it has been assumed that the 

 Federal Government will continue to carry the blister 

 rust costs. If, in addition to the taxes being modified, 

 the job of fire protection were to be taken over by govern- 

 mental agencies, the present values of the property per 

 loggable acre would rise still higher because of the greater 

 earning capacity, amounting to: 



$5 stumpage $7.90 



$7 stumpage 13.40 



Thus, it the Government assumed the cost ot fire protec- 

 tion, and the flat tax on timber were eliminated by altering 

 the tax structure, the attractiveness of sustained yield 

 would be increased for the private operator. But the 

 owner of such a property would naturally ask, "What 

 will my forest land bring if I cut it over during the next 

 10 years and forget about sustained yield .^" He would 

 find that even with no government help in fire protection 

 and no reduction in taxes, liquidation over a 10-year 

 period would be the best proposition on purely financial 

 grounds, since it would raise the present value per loggable 

 acre to: 



$5 stumpage $18.00 



$7 stumpage 26.50 



The comparison on the basis of $7 stumpage may be 

 summarized as follows: 



Sustained yield, present taxes and fire costs $6.1/ 



Sustained yield, present fire costs, taxes reduced '-"0 



Sustained yield, government fire protection, taxes reduced 13.40 



Liquidation in 10 years, present taxes and fire costs 26.50 



''' Several practicable means of eliminating the excess burden of taxation 

 on deferred-yield forest properties have been proposed in Korest Taxation 

 in the United States. (See footnote 14.) 



52 



