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and the land, but you cannot see the stocks and bonds and other securities which a man is stowing away in his safety deposit box. So I think it is safe to assume that that statement is correct: that the general property tax is not only wrong in principle, but that it does not work satisfactorily under present-day conditions. That this is coming to be understood is shown by the strong trend to-day toward the taxation of incomes.

As regards forests, and particularly growing forests, the general property tax is distinctly unfair. Professor Fairchild in one of his articles on the subject (which will be found in the Report of the National Conservation Commission, 1909, pages 611 and 612) makes this very clear. He says:

“Suppose a man invests $10,000 in a perpetual annuity at 5 per cent., yielding an annual income of $500. Suppose an annual property tax of 1 per cent. is imposed. The tax wili take $100, or 20 per cent of the income, each year. Suppose now that another man, having $10,000, puts it in trust for fourteen years, after which time, the principal having doubled, he invests it in a perpetual annuity of $1,000 a year. Under the property tax he is taxed $100 the first year, but the second year, his capital having increased to $10,500, he pays a tax of $105. His tax increases each year until the fourteenth, after which it is $200 a year. The present value of all the taxes paid by the first man is $2,000, or 20 per cent. of his capital. The present value of all the taxes paid by the second man is $3,428, or 34 per cent. of his capital. That is, the man who does not use up his income, but invests it, is punished by an excessive tax.

“Now, the business of forestry is apt to be like the investment of the second man. The annual growth of the trees, instead of being taken each year as income, is left to increase the captal, till many years later when the timber is cut and the incone begins to accrue. A property tax, strictly enforced, must inevitably place an excessive burden unon forests as compared with the ordinary investments yielding a regular annual income. It might easily take away from one-third to one-half the entire net income, and very much more under certain conditions."

Mr. Ostrander, in his introductory address, has referred to the workings of this tax in New York State.

Expressed in more homely fashion, the result of the increase year by year in the general property tax is about what would happen were the assessors to visit and levy a tax each month of the growing season on the farmer's wheat field. He would be paying taxes several times over on the same property. This is precisely what

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does happen to the owner of a growing forest, when the general property tax is strictly enforced.

True enough, someone will say, “but it never is strictly enforced.” The laws read "at its true value," but assessors are human,—at least sometimes,—and assess forest land at one-half or two-thirds, seldom over three-fourths, of its real value. On this valuation the tax rate may be high or low, as the needs of the local community for revenue are large or small. If a new road or a new schoolhouse is to be constructed, naturally the tax goes up.

It is frankly to be admitted that in many states, as the laws are now enforced, taxation of mature forests under the general property tax lays no great burden on the owner. Why then not let sleeping dogs lie? Why stir up this matter when we are well enough off as it is?

NEED OF REFORM To these pertinent questions there are several answers. First and most important is the fact that mature forests, the old stands that are part of the original forests, are in a wholly different category from newly planted or growing forests. This distinction is basic to this problem and should be clearly got in mind. Mature forests, especially uncut virgin timber, seldom represent wealth produced by the owner. They may therefore be regarded somewhat as one would a mine, a source of natural wealth properly to be exploited. Here the general property tax works no great hardship, save where carrying costs must be borne for some years before the timber is harvested. In the Pacific Coast states, especially in the Pacific Northwest, this is a very acute problem. It is not as serious with us here in the East. But the moment the old forest is cut and the owner starts to produce a new stand, naturally or by artificial planting, he faces another set of conditions altygether. So that, in discussing this matter of forest taxation, we are looking more toward a new forest, or a forest to take the place of the stand we cut to-day, rather than at the mature forests, which in any event will soon be gone.

Supposing a man has cut his forest and is starting to raise a new crop either by natural or artificial means. At first the as10:50 pass his land by es being merely brush; but as the trees gror', they beçin to ta! e notice. A tax is levied. In ten years or so they come around again. The stand is now of fair proportions. l'p goes the assessment. Then again, after another interval, another raise,—until presently a point is reached where the owner

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has paid out in taxes nearly as much as his timber will net him in profit. So he cuts his stand prematurely to avoid future loss.

Other reasons why the general property tax works injury to the practice of forestry are the unsystematic and irrational manner in which assessments are made. The local assessors are usually honest men, but, with few exceptions, they work by rule of thumb, or tradition, rather than according to any well thought out or equitable method of ascertaining the true relative values of forest property. No careful investor is willing to put his money into a venture the future costs of which are so shrouded in uncertainty. Furthermore, while it is true that forests are at present generally under-assessed, and not over-taxed in rate, how long may we expect such leniency to continue? Surely, with the need of increased revenues on every hand, the forests will not long remain overlooked. Stricter enforcement of the tax laws will mean higher assessment and perhaps also rising rates of taxation. With the time element involved, which is necessarily a factor in forest production, some way out must be found, or no one will grow forests, except perhaps the State.

SUGGESTED REMEDY So much for the case as we now find it. What is the remedy? To this the forester and the economist answer, a tax on the income; or, in every-day language, that a tax be laid on the yield, once for all, when the stand is finally harvested. During its period of growth the forest pays no tax, under this plan; but when it comes to be cut the owner pays to the State a fair percentage on the yield-. 5, 10, 15 per cent, as the case may be. But he knows beforehand what to expect, and furthermore that he will only be subjected to the tax once, and that at the time when he receives his return on his investment. In addition to the tax on the timber, collected once, when the timber is cut, this plan includes also a nominal yearly tax on the land itself. I will speak later in regard to this.

Now is not this an improvement over the present illogical method of haphazard and unpredictable increases in assessment and consequently in taxation, made at the whim of the assessor? I submit that it is; and that with the yield tax one can interest forest planting investors who would fight shy of tying up any money at all in the sort of project that is all that we can offer them to-day.

One other notable advantage possessed by the plan of taxing the yield at the time the timber crop is harvested is that the danger of loss from fire or other causes is transferred from the owner ta the State. Should a forest that is taxed under the general property

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tax burn up 5 or 10 years before it is ready to cut, the owner suffers the dead loss of all the money he has paid out in taxes, as well as losing the forest itself, -unless he is insured by Mr. de Carteret here, in his company. Under the yield tax method, if the forest burns there is, to be sure, nothing left to cut, but also there is nothing to tax. The owner at least does not have to pay for that dead horse.

You will notice that exemption from taxation has rio part in this program. Forests ought to be taxed. There is no reason why they should not bear their share, along with other property. The whole point is that forests, like all other forms of wealth, must be taxed justly and that the general property tax is not a just tax.

NO EXEMPTION Exemption of forests from taxation is wrong in principle at the start, and, as the history of many states has proved, does not work in practice. Numerous causes contribute to make tax exemption ineffective. A few are that the local assessors not infrequently so adjust values on the owner's other property as to offset the reduction made on his forest land. Or, even more often, the tax-free period is so short (35 years, under the New York laws of 1912) that about the time the young stand begins to interest the assessor, it again becomes liable to taxation. Usually, too, there is so much red tape to be unwound that few persons care to go to the bother to save the small amount involved.

Prizes and bounties for tree-planting have fared no better, any more than did the Federal Timber-Culture Acts of the early 70's. What few forest stands have resulted are but a drop in the bucket when the areas in need of reforestation in any given state are considered, and in many cases even these plantations have been established at a cost wholly out of proportion to the results obtained. Very often, too, bounty and exemption acts have been made unworkable by requirements inserted at the instance of well-intentioned but misinformed "friends of forestry," who were wofully ignorant of the kinds of trees to use and of the principles of forest planting. Heaven speed the time when we can get rid of such "friends of forestry”—the sentimentalists. No, forests should stand on their own feet. They do not need protection from taxation. A fair tax, justly levied, is all that should be asked for them.

FOREST TAXATION IN OTHER STATES How is the problem of forest taxation being met? Several of our neighboring states have enacted forest tax laws based on the

principle of the tax on yield; among them, Connecticut, Massachusetts, Vermont and Pennsylvania. Of these, Connecticut and Massachusetts are pre-eminent. In New York we have one law based upon this principle (Chapter 363, Laws of 1912), but it only applies to tracts not exceeding 50 acres and is hampered by a considerable amount of red tape in its application. Mr. Pettis can tell you, better than I can, how far that law has been put into effect. Practically it is negligible. Am I right about that, Mr. Pettis,--that that law has practically not been put into effect? 1 refer to Chapter 363 of the laws of New York for 1912.

MR. Pettis: I would not want to answer that by speaking just in regard to the particular chapter to which you refer. There are three of these taxation laws, and probably, in the last five years, all together about twenty-five applications have been made for clas. sification. As you say, there is so much red tape about it and so much possibility of the rate of assessment being increased on the rest of the lands that there is no advantage in it.

PROFESSOR HOSMER: The other two laws which Mr. Pettis mentions are law's having to do with tax exemption. This law to which I refer is based on the principle of a yield tax.

The essential features of the Connecticut law, as regards new forests,—and please bear in mind that by that term I mean young growth and stands developed from young growth,—are as follows: Forest land may be classified separately from all other property. The land itself and the timber on it are assessed and taxed separately. The land alone, considered as without the forest cover, is assessed at a valuation similar to that of surrounding open land of equal character, which valuation holds for a period of fifty years. The land alone is then taxed annually at the local rate, but in no case to exceed ten mills, until the expiration of the fifty-year period, v hen the land is re-valued for another equal time. That is a comparatively small matter, although it is an annual tax. As regards the timber, no tax is levied until the stand is harvested, when ten per cent of its stumnage value is collected. Provision is made for the use, free from all tax, of material cut for domestic use.

THE MASSACHUSETTS LAW In Massachusetts the law of 1914 is similar in its main features to that of Connecticut. Only forest land that is registered is subject to the law. Such registration is optional. If one prefers to continưe urder the old system he is free to do so. If registered, land erd timber are valued separately by the assessors. The land itself says an arruil tax. If it is valued at $5.00 an acre, as is usual,

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