financing long-time operations, unavailability of 

 insurance protection of standing timber, unstable 

 and inadequate markets for forest products, fluctu- 

 ating and unpredictable price levels, and rising 

 costs of operation. 



Forest Taxation 



Taxation of forest properties has been the sub- 

 ject of more discussion and study in recent years 

 than any other forest economic problem (6, 7). 

 It is generally designated as one of the serious 

 obstacles to private forestry not only in this region 

 but also in practically all forest regions in the 

 country. Although scientific investigations are 

 revealing that the influence of taxation has been 

 exaggerated in many cases, it still deserves first 

 mention in our list of economic problems. 



The property tax is the chief factor in the taxa- 

 tion problem. Owing to the nonliquidity of forest 

 investments, the necessity of paying taxes imposed 

 on property transfers upon the owner's death may 

 interrupt continuity of ownership to the detriment 

 of good forest management. Since no study has 

 been made here of the specific influence of inheri- 

 tance and estate taxes on forestry, and since in- 

 come and other taxes create no problem peculiar 

 to the practice of forestry, further discussion of 

 forest taxation will be restricted to the property 

 tax. 



A study made in 1936-37 (74) showed the aver- 

 age assessed value per acre of eastern Oregon 

 timbcrland to be $10.10, the full value per acre 

 $19.15, and the average tax levy 2.8 cents per $1 

 of assessed valuation. It gave the estimated 

 annual carrying charges on 2,125,173 acres of 

 private timberland in eastern Oregon as: Taxes 

 $604,908, fire patrol $41,689, and interest (3 per- 

 cent on full value) $1,220,991, making a total of 

 $1,867,588. The area involved in this calcula- 

 tion was roughly three-quarters of the privately 

 owned area of saw timber in eastern Oregon. 

 The average annual tax per acre on the basis of 

 the figures given was 28 cents, which is considerably 

 less than comparable figures for a decade previous. 



Analysis of reports of the State Tax Commission 

 (75) shows that in Oregon the annual taxes levied 

 on all real property reached a peak of about 

 $51,000,000 in 1928, but by 1937 had receded to 

 about $40,000,000. In Washington there has 



been a marked decrease in annual property tax 

 levies on all real property from a peak of $81,000,- 

 000 in 1929 to $42,000,000 in 1937 (18). In 

 Washington this recession was brought about by 

 enactment of over-all limitations of 37 mills on 

 urban and 25 mills on rural property (Iniat. Meas. 

 64, 1932) accompanied by a tremendous increase 

 in the sales tax and various business and occupa- 

 tional taxes, from $13,000,000 in 1930 to $44,000,- 

 000 in 1937. In Oregon the increase in other 

 taxes was not as great. 



In both States practically all property tax reve- 

 nue goes to local government and the .State 

 depends upon other forms of taxation. In 1939 

 the Washington State Government received only 

 5 percent of its total income from the property 

 tax. Although the States have been assuming 

 many of the functions formerly performed by the 

 counties and are turning over to local govern- 

 mental bodies an increasingly large proportion of 

 their receipts from all sources, the property tax is 

 still the mainstay of local government. Conse- 

 quently, the forest-land owner has a definite inter- 

 est in the functioning of local government. 



The annual tax charges, taken alone, are evi- 

 dently not high enough to precipitate widespread 

 liquidation of old-growth timber. It has been 

 found (6) that interest on invested capital far 

 exceeded taxes as a factor contributing to pre- 

 mature and excessive cutting. But taxation has 

 contributed to that undesirable practice; the 

 property tax favors old-growth timber that is being 

 liquidated and thus tends to accelerate cutting of 

 such timber. 



The only special tax legislation that has been 

 enacted to date are laws (Oregon in 1929, Washing- 

 ton in 1931) removing from the ordinary operation 

 of the property tax certain cut-over and burned- 

 over lands suitable for reforestation and not con- 

 taining timber in merchantable quantities. Lands 

 classified under these laws pay a small annual land 

 tax and a yield tax on timber products cut. In 

 eastern Oregon the land tax is 4 cents per acre and 

 the yield tax is 12% percent of the value of forest 

 crops harvested. Under the Washington law, clas- 

 sified properties in counties east of the Cascade 

 Range are assessed at a fixed valuation of 50 cents 

 an acre. A yield tax is also imposed on the market 

 value of timber or other forest crop cut, the rate 



81 



