Practical Forestry in the Pacific Northwest Part 11

Nor does the proposed system by any means either subsidize the forest grower or a.s.sure him a profit. It merely puts on a basis similar to that of other enterprises a business more greatly handicapped by long-deferred returns, risk of loss, uncertainty of future prices, and continued current expense without current revenue. Only escape from fire and high future stumpage prices will permit profit at best. Otherwise, since the tax is definite and not upon income, the forest grower will pay the community for the honor of providing it a resource at his own expense.

It is believed, however, that a more fortunate outcome is sufficiently promised in this region of rapid growth if we remove the single fatal handicap of uncertain confiscatory taxation.

VIEWS OF EXPERT AUTHORITIES

THEODORE ROOSEVELT: Second only in importance to good fire laws well enforced is the enactment of tax laws which will permit the perpetuation of existing forests by use.

GIFFORD PINCHOT: Land bearing forests should be taxed annually on the land value alone, and the timber crop should be taxed when cut, so private forestry may be encouraged.

NORTH AMERICAN CONSERVATION CONFERENCE, Washington, D. C.: Believing that excessive taxation on standing timber privately owned is a potent cause of forest destruction by increasing the cost of maintaining growing forests, we agree in the wisdom and justice of separating the taxation of timber land from the taxation of timber growing upon it, and adjusting both in such manner as to encourage forest conservation and forest growing.

The private owners of land unsuited to agriculture, once forested and now impoverished or denuded, should be encouraged by practical instruction, adjustment of taxation, and in other proper ways, to undertake the reforesting thereof.

GIFFORD PINCHOT, ROBERT BACON, JAMES R. GARFIELD, Commissioners representing the United States.

SYDNEY FISHER, CLIFFORD SIFTON, HENRI S. BOLAND, Commissioners representing the Dominion of Canada.

ROMULU ESCOBAR, MIGUEL A. DE QUEVEDO, CARLOS SELLERIER, Commissioners representing the Republic of Mexico.

E. H. OUTERBRIDGE, Commissioner representing the Colony of Newfoundland.

FRED. R. FAIRCHILD, Professor of Economics, Yale University, member International Tax Conference: Probably nothing more effectually discourages investment than uncertainty as to future costs. And whatever may be said of the present system of taxation, there can be no question of its arbitrariness and uncertainty. If to all the other risks of forestry we add uncertainty as to what the taxes are going to be, we cannot blame investors for some hesitation in embarking on an enterprise which may have to pay taxes fifty years before the returns come in. And more than this; the investor cannot safely base his calculations on the continuance of the present lenient administration of the property tax. As has been shown, the tendency today is toward a stricter enforcement of the law and a heavier burden of taxation.

State const.i.tutions stand today in the way of many plans for reform in State and local taxation. The movement toward their amendment is growing as part of the general programme of tax reform.

The real problem of forest taxation is in connection with the future of our timber lands rather than with their past. The preservation of the forests is a matter of the utmost importance. So far our forests have been exploited with little or no regard for the future.

But the present methods cannot last much longer. Forestry must come some time, and its early coming is a thing greatly to be desired.

And whenever we are ready to seriously undertake it we will find our present methods of taxation a severe handicap. Strictly enforced, according to the letter of the law, the annual tax on the full value of the land and standing timber is almost sure to result in excessive taxation, and the timber owner cannot count on the continuance of the present lenient enforcement of the law. Even if the tax might not be excessive, its uncertainty would be a serious obstacle to investment. We can hardly hope to see the general practice of forestry as long as the present methods of taxation continue.

To be equitable, taxation of timber lands like taxation of anything else should be based on income or earning power.

With regard to its effect on revenue, there is little to be feared from the tax on yield. Eventually, revenue will be increased by a method of taxation which does not prevent the development of forestry. Forests paying a moderate tax are better than waste lands abandoned and paying no tax at all.

The tax on yield has many decided advantages. It avoids the evils of the general property tax. It is equitable and certain. It is in harmony with the peculiarities of the business of forestry, and will be a distinct encouragement to the practice of forestry. Its adoption by the States would remove one obstacle to the perpetuation of the nation's forest resources.

NATIONAL CONSERVATION COMMISSION, appointed by the President of the United States: It is far better that forest land should pay a moderate tax permanently than that it should pay an excessive revenue temporarily and then cease to pay at all.

We tax our forests under the general property tax, a method of taxation abandoned long ago by every other great nation. In some regions of great importance for timber supply, and in individual cases in all regions, the taxation of forest lands has been excessive and has led to waste by forcing the destructive logging of mature forests, as well as through the abandonment of cut-over lands for taxes. That this has not been even more general is due to under-a.s.sessment, to lax administration of the law, but to no virtue in the law itself.

Already taxes upon forest lands are being increased by the strict enforcement of the tax laws. Even where this has not yet been done, the fear that it will be done is a bar to the practice of forestry.

We should so adjust taxation that cut-over lands can be held for a second crop. We should recognize that it costs to grow timber as well as to log and saw it.

From now on the relation of taxation to the permanent usefulness of the forest will be vital. Present tax laws prevent reforestation on cut-over lands and the perpetuation of existing forests by use.

UNITED STATES FOREST SERVICE: It is evident that the old method of taxing forest property, as well as other property, at its supposedly full value will, as the value of timber increases and is recognized, put a premium on premature and reckless cutting, and will hinder any effort to reforest cut-over lands. No business man will engage in an undertaking where the returns are so long deferred and the risks are uninsurable unless he can estimate the probable expenses and a reasonably large profit. That the forests themselves, irrespective of their ability to stand taxation, are of great value to the communities in which they are located, for water protection, lumber supply, and scenery in resort regions is undoubted.

The fundamental difficulty is that the tax should be in proportion to yield or income and not in proportion to the market value of the land and standing timber. Economists are substantially agreed that this principle is applicable to the taxation of all kinds of property with certain exceptions. Where there is a reasonably certain annual yield or income the market value is theoretically dependent upon it. A woodlot or forest, however, usually in this country has no annual yield. It is unjust to require the owner to carry the full annual burden of taxes, risk and protection in every year for the chance of a yield once in fifty years, and it is impossible for the owner to do it, for the taxes with compound interest would confiscate his entire capital.

INTERNATIONAL TAX CONFERENCE, held at Toronto: _Resolved_, That it is within the legitimate province of tax laws to encourage the growth of forests in order to protect watersheds and insure a future supply of timber; and legislation, or const.i.tution amendment where necessary, is recommended for these purposes.

AMERICAN FOREST CONGRESS, Washington, D. C.: _Resolved_, That we earnestly commend to all state authorities... reducing the burden of taxation on lands held for forest reproduction in order that persons and corporations may be induced to put in practice the principles of forest conservation.

PENNSYLVANIA DEPARTMENT OF FORESTRY: Tax a.s.sessors have differing ideas of value and their a.s.sessments vary widely. The only remedy for the forest owner is to appeal from the a.s.sessment to the county commissioners, and, if here unsuccessful, to the county court, a matter involving both time and expense and frequently more costly than the differences in taxes to be gained; _but at the same time_ the fact is well recognized that forested land is both unequally and unfairly taxed.

H. S. GRAVES, Chief Forester for the United States: The forest areas now owned chiefly by lumber companies will cease to be devastated as soon as fires are stopped. They will not, however, be handled to any large extent with a view of future production until the taxes are placed on a fair basis.

FILIBERT ROTH, Professor of Forestry, University of Michigan, State Fire Warden of Michigan (speaking of frequent local att.i.tude toward non-resident owner):

Though, in truth, these resident people often make their living from the tax money of the non-resident, and though the latter contributes toward every rod of road and every schoolhouse built, and other improvement, yet he is treated as if he were a wrongdoer, is taxed unmercifully, and, in addition, a trespa.s.s on his land or forest is excused and it is almost impossible in many places to get conviction.

If the State and local people had treated the owners of timber honestly and had spent a reasonable part of the taxes in giving the protection which the owner had a right to expect under the Const.i.tution, there would still be more than half of our pinery lands covered by forest.

Forestry is no "sugar trust baby," as so many are trying to make it out. Forests can pay taxes as well as any other property. Forestry is like any other honest business, it cannot stand confiscation.

Suppose you have a twenty-acre lot of sugar beets and the a.s.sessor would hang around until the beets are ripe and then figure: "The land is good; I a.s.sess it at $75 per acre, and the crop is worth $75 more, so that this property will stand at $150." What would you say? But the a.s.sessor who a.s.sesses the timber as part of the real estate and a.s.sesses the same crop of timber year after year does precisely this thing. He a.s.sesses land and crop for the owner of a woodlot and forest, while for all other farmers he a.s.sesses only the land.

Let the State pa.s.s a few simple laws; provide for the protection of forest property as we provide for other property; prevent confiscation under the guise of taxation; stop forcing its poor tax lands on the market, and go ahead with a good example on its own lands, and instead of holding them in a waste land condition protect them and grow timber.

A. T. HADLEY, President Yale University: We have it in our power to make intelligent forestry by individuals more profitable. The margin between business that succeeds and business that fails is a narrow one, and by just covering that margin by _differences in tax laws_, by differences in protective laws, by laws for the prevention of fires, we can make profitable an industry which the public needs, but which today is unprofitable.

JAMES O. DAVIDSON, Governor of Wisconsin: It is to be hoped that laws will be pa.s.sed encouraging owners to cut timber conservatively under forestry regulations, rather than oblige them to cut as quickly as possible to escape the injustice of taxation.

PROFESSOR F. G. MILLER, University of Washington: Next to fire the most serious handicap to the progress of forestry is our unjust method of forest taxation. Laying as we do a yearly tax on both the growing crop and the land, the burden of taxation makes the holding of land for a second crop prohibitive as far as the private owner is concerned.

The farmer pays a yearly tax on his land, and a tax on his crop each time he harvests one. This is usually annually. However, if through drought, insect invasion or other misfortune he loses his crop, he is not called upon to pay a tax upon it.

SENATOR REED SMOOT, of Utah, Chairman Section of Forests, National Conservation Commission: One of the urgent tasks before the States is the immediate pa.s.sage of tax laws which will enable the private owner to protect and keep productive under forest those lands suitable only for forest growth. In our discussion in committee meeting there was a question raised by a member present as to this recommendation, claiming that it would encourage great monopolies in securing larger holdings of timber, if an annual tax was not required on the timber itself. I have studied this question in foreign lands, particularly in Germany and Switzerland, and I find that the result has been exactly the opposite. It is a short-sighted policy which invites, through excessive taxation, the destruction of the only crop which steep mountain lands will produce profitably.

Taxes on forest land should be levied on the crop when cut, not on the basis of a general property tax--that unsound method of taxation long abandoned by every other great nation.

GOVERNOR NEWTON C. BLANCHARD, of Louisiana: Under the present tax laws of many of the States large a.s.sessments are put on timber lands, and this is forcing timber holders--the owners of the sawmills--to cut off that timber too rapidly. At least it is having much effect that way. Give them the encouragement to hold back and not force their product upon the markets, and then exempt, by a system of wise tax laws, cut-over lands devoted to purposes of reforestation.

MARYLAND STATE BOARD OF FORESTRY: The present method is to a.s.sess woodlands under the general property tax, making the a.s.sessment high where the timber is valuable and placing it low where the timber has been cut off. There is in the operation of this system a tendency to cut off the timber before it reaches maturity to avoid the high rate of taxation. A premium is placed on forest destruction and a penalty on forest conservation.

The growth of timber is slow and under present stumpage prices and rates of taxation there are comparatively few cases where the sale value of the crop equals the cost of growing it, if a fair rental for the land is considered. It is true that most of the forests are on lands that could not be used for anything else, but it is not fair to expect the landowner to produce timber which is a public necessity, the use of which is only less universal than food crops, at a financial sacrifice. Increasing prices and better forest management are relieving the situation to some extent, but the most effective, as well as the most equitable way, is through a change or modification of present tax laws.

PROFESSOR EDWIN R. A. SELIGMAN, Columbia University: The general property tax as actually administered is beyond all doubt one of the worst taxes known in the civilized world. Because of its attempt to tax intangible as well as tangible things, it sins against the cardinal rules of uniformity, of equality, and of universality of taxation.

PROFESSOR ALFRED AKERMAN, Georgia University: One reason why it (the general property tax) is so outrageous in practice is that it is wrong in theory. The mere possession of property may or may not be an index to the ability of the owner to pay tax. It all depends on whether the property brings income.

ALLEN HOLLIS, Secretary Society for Protection of New Hampshire Forests: Taxation today, in my opinion, is the greatest menace to forest preservation.

One principle is absolutely sound--we all know it, and what we have to do is to make everybody else know it--and that is, that the annual taxation on a crop which is constantly increasing in value each year means confiscation of that property.

It is submitted here that no single factor bears so definitely upon the future of our forests as this const.i.tutional requirement of equality in taxation. As a business proposition, no one can afford to hold woodlands and pay annually 2 per cent upon their actual value, increased each year by growth and advancing prices, during the fifty to one hundred years necessary for maturing the crop.

CHARLES LATHROP PACK, Director American Forestry a.s.sociation: While the nation and the State are working to devise ways and means of conserving our forest resources, we are at the same time, in a real sense, taxing our timber to death.

Our present tax laws prevent reforestation on cut-over lands and the perpetuation of existing forests by proper use and economic cutting.

STATE OF MICHIGAN FORESTRY COMMISSION (extracts from report to governor): The system of taxation should be modified so as to stimulate timber production instead of repressing it.