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■ 33 Fairchild, Frod Rororc, 1877-1966
K48862 i’oroGu "La.-catpion} addrocnos by Frod Ro^'ors Fair—
child... A. 0. GhaTT... B. E. Fornovf... discussion
by dclo^atoG to tho 0 onf oronco. Golunbus, Ohio,
International tax association (-1909?]

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Forest taxation

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WITH THE COMPLIMENTS OF THE

NEW YORK TAX REFORM ASSOCIATION

56 PINE STREET, NEW YORK, N Y.

FOREST TAXATION

addrersp:s by

FRED ROGERS FAIRCHILD

ASSISTANT PROFESSOR OF ECONOMICS, YALE UNIVERSITY

NEW HAVEN, CONN,

A. C. SHAW

PRINCIPAL EXAMINER, UNITED STATES FOREST
SERVICE, WASHINGTON, D.C.

DR. B. E. FERNOW

SCHOOL OF FORESTRY, UNIVERSITY OF TORONTO
TORONTO, CANADA

Reprinted from the Addresses and Proceedings of the
International Conference on State and Local
Taxation held at Toronto, Canada
Oct. 6-9, 1908

INTERNATIONAL TAX ASSOCIATION
COLUMBUS, OHIO

FOREST TAXATION

ADDRESSES BY

FRED ROGERS FAIRCHILD

ASSISTANT PKOFESSOR OF ECONOMICS, YALE UNIVERSITY

NEW HAVEN, CONN.

A. C. SHAW

PRINCIPAL EXAMINER, UNITED STATES FOREST
SERVICE, WASHINGTON, D.C.

DR. B. E. FERNOW

SCHOOL OF FORESTRY, UNIVERSITY OF TORONTO
TORONTO, CANADA

DISCUSSION BY DELEGATES TO THE CONFERENCE

Reprinted from the Addresses and Proceedings of the
International Conference on State and Local
Taxation held at Toronto, Canada
Oct. 6-9, 1908

IXTERXATIOXAL TAX ASSOCIATION
COLUMBUS, OHIO

■ \

RESOLUTION

ADOPTED AT SECOND INTERNATIONAL TAX

CONFERENCE

TORONTO, CANADA, OCTOBER 6-9, 1908

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 constitutional amend-
ment where necessary, is recommended for these

purposes.

THE TAXATION OF TIMBER LANDS IN THE

UNITED STATES

By Fred Rogers Fairchild

Assistant Professor of Political Economy in Yale Universitj',

Xew Haven, Conn.

The writer of this paper is at present engaged in the prepara-
tion of a report on the taxation of timber lands for the National
Conservation Commission, appointed last spring by the Presi-
dent of the United States. With the assistance of the United
States Forest Service, a large amount of material has been col-
lected and a good deal of preliminary work done. The pajier
which is here presented is based upon that investigation. This
work is only the beginning of a thorough study of the subject,
which the writer expects to make in cooperation with the Forest
Service. The present paper, therefore, should be regarded as
a preliminary report only, to be followed at some future time
by a moi'e exhaustive study.

The evils of the general property tax are well known. Cer-
tainly they need no emjihasis before this audience. Hut in
addition to its other shortcomings, the general property tax is
defective in a peculiar way in the case of all invested wealth
which is either increasing or declining in value. Suppose a man
invests §10,000 in a perjietual annuity at 5 per cent, yielding an
annual income of §500. Suppose an annual property tax of
1 per cent is imposed. The tax will take §100, or 20 per cent
of the income each year. Suppose now another man, having
§10,000, puts it in trust for 14 years, after which time, the prin-
cipal having doubled, he invests it in a perpetual annuity of
§1000 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

STATE AND LOCAL TAXATION

value of all the taxes paid by the first man is S2000, or 20 per
cent of his capital. The present value of all the taxes paiil
the second man is $3428, or 34 per cent of his capital. That is,
the man who does not use up his income, but reinvests it, is
punished bv an excessive tax.

Now the business of forestry is like the investment of the
second man. The annual growth of the trees, instead of being
taken each year as income, is left to inciease the capital till
many vears later, when the timber is cut and the income begins
to accrue. A property tax, strictly enforced, must inevitably
place an excessive burden upon forests as compared with the
onlinary investments yielding a regular annual income.

We have, then, at the start, a theoretical presumption against
the taxation of forests under the general ]>roperty tax. More-
over, we are beginning to hear complaints of unjust and excess-
ive taxation, of forests prematurely cut on account of taxes, of
wasteful and destructive “skinning” of timber lands, of cut-
over lamls not reforested, but abandoned because of taxation,
and of timber-land owners who do not practice forestry because
the taxes would eat up the profits. Here seems to be a problem

worthy of careful study.

Timber lands are taxed to-day under the general property
tax in every State and Territory of the United States, generally
exactly the same as other kinds of wealth. In only fourteen
States is any special consideration given to timber lands in the
tax laws, these States attempt to encourage the planting and
cultivation of trees, or the general practice of forestry, by entire
or partial exemptions from taxation, by rebates of part of the
taxes, or by bounties to be deducted from the taxes. Four other
States make provision for bounties, although these bounties
have no connection with taxation. Three States, included,
however, in those mentioned above, try 1o encourage forestry
bv offering prizes, without any reference to taxation. In a
of the other twenty-eight States, and in the two Territories, tim-
ber lands receive no special consideration. None of these
schemes of exemptions, rebates, bounties or prizes has touched
the real problem of forest taxation. These laws aie u\ie}
taken advantage of, and their effect on the actual taxation o
timber lands is usually negligible. We return, therefore, to

TAXATIOX OF TIMBER LANDS IN UNITED STATES 3

the statement that timber lands are taxed in the I nited States,
with few and unimportant exceptions, exactly the same as

other wealth suliject to the general property tax.

The administration of the tax on forests needs no special
notice, for it is simply the general property tax with which we
are all familiar. Here, as everywhere, we find the same loose
system of assessment in the hands of men having no special
qualification for the work, and based upon the taxpayer s dec-
laration, upon hearsay evidence, and upon occasional examina-
tion of the property, which at best must be superficial and inac-
curate. We have the well-known results of this hit or miss
method, — inequality, overvaluation, undervaluation and gen-
eral confusion. Timber lands, like other wealth, are as a rule
grossly undervalued. The tax rate for timber lands is the
same as for i>roperty in general, and the collection of the tax
needs no special attention.

It is important to know just what is the actual buiden of
taxation on the forest lands of the United States to-day. To
thoroughly answer this question will require a detailed study
of forest taxation in every State, and indeed m every town
where forests are important. This study will take time. Onh
a beginning has yet been made. The conclusions here piesented
are therefore only tentative, and may very likely have to be
modified after further investigation. They are based upon
(1) miscellaneous evidence from forestry journals, lumbei tiade
journals, and publications of the United States Forest Sen ice,
and of the several State foresters; (2) an extensive correspond-
ence with State foresters, tax officials, timber owners and others,
and (3) special local investigations made by members of the
Forest Service staff. The most complete and exact body of
evidence comes from a special report on the taxation of tim-
ber lands in New Hampshire, made by one of the Forest Service
staff, after an investigation covering most of the past spring
and summer.

From this evidence, so far as it goes, the following conclusions
seem to be warranted: The valuation of forest lands is made
in the most haphazard way, resulting in the greatest uncertamty
and inequality. For example, a wood lot in New Hampshiie
was purchased for $1000. Its assessed value, which had been

STATE AND LOCAL TAXATION

•S400, was immediately raised to S3000, or three times the pur-
chase price. The tax rate in this town was 1.83 per cent.
-\ssuming that the purchase price represented the true value of
the property, it was required to pay a tax every year of 5|- per
cent of its value. In this particular case the owner made no
complaint, for the reason that he believed this excessive tax
was counterbalanced by undervaluation of some of his other
lots ; an intere.sting commentary on the results of local assess-
ment.

As an example of undervaluation, we may cite another piece
of timber land in New Hampshire which was sold for .815,000.
Its assessed value at the time was .8.500, oi‘ one thirtieth of the
selling price. Even after the sale its assessed value was raised
onlv to .SHOO.

Here is an interesting example of unequal assessment. Two
adjoining tracts in New Hampshire were estimated by the
Forest Service investigator to be of about equal value. The
first, which was, if anything, the more A'aluable of the two,
was assessed at .SoOO; the second, at S3500, or seven times the
other.

These examples are extreme cases, though similar cases are
common enough. What we are more especially interested in is
the prevailing burden of taxation in the general run of ordinary
cases. The facts seem to be as follows; In some States or re-
gions the prevailing burden of taxation on timber lands is
undoubtedlv verv heavv. In other States or regions timber
lands are taxed very leniently. Individual cases of unduly
lenient and excessively heavy taxation are common, probably,
everywhere. Leaving out of consideration individual cases,
and without going into local conditions, it is safe to say that in
general, timber land, like most other property, is grossly under-
valued by the assessors. This assessment is combined with a
high tax rate; that is, a rate which would generally result in
excessive taxation, if the property were assessed at its true
value. As a general rule, however, due to 1 he prevailing under-
assessment and the lax administration of the laws, timl:)er
lands are not subjected to an excessive burden of taxation.

TAXATION OF TIMBER LANDS IN UNITED STATPIS

A third conclusion that stands out distinctly is that there
^ is at present in many places an unmistakable tendency tow aid

I heavier taxation of timber lands. This tendency is seen espe-

’ cially in those regions wdrere forests have heretofore been

admittedlv taxed very gently, such as the wild lands in the un-
incorporated parts of Maine and New Hampshire.^ Here there
is consideralde complaint of the escape of wealthy timber owners
from their just share of taxation, and a growing demand for
amendments to the statutes wdiich will put a heavier tax upon
I these lands. Again, the movement toward heavier taxation is

seen in the common tendency to value timlier lands more
1 accuratelv, and enforce the existing laws more stiictl}.

I Having shown in a general way wdiat the actual burden of

taxation is at present, we must next inquire wdiat effects taxa-

I tion has had upon the forests of the country.

' To a considerable extent the answer to this question may be

inferred froin the foregoing conclusions as to the burden of the
general property tax on forests. There can be no doubt that
' in many of the cases wdiere taxation has been excessive, it has

hastened the cutting of timber and led to wasteful skinning
of the land, often destroying the chance of a valuable second
grow'th, and sometimes leading to the abandonment of the land

'' for delinquent taxes.

On the other hand, in all those cases wdiere the tax burden

. has been very small, taxation can obviously have had little

* effect on the management of the property.

In the general run of ordinary cases, as has been shown, the
present liurden of taxation cannot be considered excessive.
And in the general run of cases there is no evidence to show
that forests have been affected seriously by taxation. Indeed,

, . there is much positive evidence to the contrary. That the

American forests have been cut off at a tremendous rate of late
years, that the methods of cutting have often been wasteful
t and destructive of future growth, and that there is little ten-

dency on the part of timber men to reforest cut-over lands, are
facts wdiich need no demonstration. But that taxation has
had any large influence in bringing about these results is an
inference apparently not warranted by the facts. This is a
; phase of the problem wdiich has been greatly exaggerated in

STATE AND LOCAL TAXATION

the public mind. The recent heavy and wasteful cutting of
our forests has been due to various economic influences, among
which taxation has played a very small role. This conclusion
is supported by evidence from many sources, including letters
from some five hundred of the leading timbermen all over the
country, written in reply to inquiries on this point.

A good deal of cut-over land has been abandoned for taxes
in certain States, particularly in the Lake States and in the
far West. Michigan has six million acres. California has
about one million acres. In some cases this has been due, in
part at least, to excessive taxation. Still, throughout the
country as a w’hole, there is very little land abandoned for taxes,
and in the great majority of the States the matter of abandoned
lands is negligible.

Forestry is very little practiced in America to-day, but that
this state of affairs is due in any great measure to taxation is
utterly denied by the evidence. The lumbermen, as a rule, are
not thinking much about forestry. There are other factors in
the forestry problem of far greater w^eight than taxation, and
the general practice of forestiy wall not be l)rought about by
amendments to the tax laws. This conclusion also is sup-
ported by the great majority of the letters rcjceived from lum-
bermen all over the countrv.

We conclude, then, that wdiile in some cases forests have
been excessively taxed, wdth more or less serious results, as a
general rule taxation has not, up to the pi’esent time, been
responsil)le for any widespread disastrous results on the for-
ests of the country.

It does not follow that the problem of timber land taxation
is of no importance, or of only academic intenist. Its practical
bearing is rather on the future of our forests than on their past.
The present methods of handling our forests cannot last very
much longer. The practice of forestry must come sometime,
and its speedy coming is a thing greatly to be desired. And
w’henever w’e are ready to seriously undertake it, we will find
our present method of taxation a heavy handicap.

It can be shown theoretically that the general property tax,
strictly enforced in accordance with the plain letter of the law,
might easily take away from one third to one half of the entire

T.\XAT10N OF TIMBER LANDS IN UNITED STATES 7

net income of the forest, and verv much more under certain
conditions. Forestry should not be sulqected to such an un-
just burden of taxation. It maybe objected that, as a matter
of fact, forests are not taxed on anywdiere near their true value,
and this practice should be recognized. But this does not
relieve the situation much. Probably nothing more effectu-
allv discourages investment than unceitaintv as to future
costs, .^nd whatever mav be said of the present svstem of
taxation, there can be no question of its arbitrariness and un-
certainty. If to all the other risks of forestry we add uncer-
tainty as to wdiat the taxes are going to l)e, we cannot blame
investors for some hesitation in embarking on an enterprise
w'hich 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 generally lenient
administration of the property tax. As has been shown, the
tendency to-day is toward stricter enforcement of the law and
a heavier burden of taxation.

The problem of forest taxation is, then, an important one,
and a very i)ractical one; and its importance is bound to in-
crease as time goes on, until it is satisfactorily settled. Let us
try to outline the principles on w’hich a scientific system of
forest taxation shoukl be based.

We may assume, without much danger of controversy, that
taxation should be based on income or earning power. The
tax on income mav be collected at the time the income accrues,
or it may be in the form of an annual tax on the capital value
of the income. If the rates of the income tax and the capital
tax bear the proper relation to each othei’, these two ways of
applying the tax produce identical results.

In the case of forests, the tax based on income may be ap-
plied either as a tax on the yield wdienever any timber is cut,
or as an annual tax on the present capital value of the forest,
based on all its expected future incomes and exj)enditures,
w'hat the foresters call “expectation value.” To illustrate by
a single example : Suppo.se that a forest is so managed as to
yield a net income of -SI 50 sixty years from to-tlay, and again
every sixty years thereafter, without any cost for planting. If
interest is at 5 per cent, a simple calculation will show that the

STATE AND LOCAL TAXATION

prespiit expectation value of the forest is $8.48. Suppose it is
desired to tax this forest at the rate of 20 per cent of its net
income. This may be accomplished either 1)V a tax of 20 per
cent of the net yield whenever it occurs, or l)y an annual tax
of 1 per cent of the expectation value. The first would mean a
tax of $30 paid every sixty years, when the timber is cut. The
.second would mean a tax of 8-|- cents paid (jvery year. The
present value of these two taxes — that is, $30 paid sixty years
from date ami every sixty years thereafter, and 8| cents paid
every year beginning at once — is exactly the same.

The above is an example of a forest managed to produce a
sustained periodic yield. Forests may also be managed so as
to produce a sustained annual yield. And finally, forests may
not be managed according to any system of forestry, the yield
being purely irregular.

Obviously the tax on yield when cut may l)e applied to any
forest, whatever the system of management, or even where no
systematic management is employed. On the other hand, the
tax on expectation value is more complicated. It requires the
calculation of present value based on all future expected incomes
and expenses. And in the case of the forest with irregular yield,
it is impossible to apply this method at all.

A matter of the utmost importance, in the case of the tax
on expectation value, is the rate of interest at which the calcu-
lation is made. That a good deal depends on what rate is
selected may be realized from the single fact that if in the above
example 4 per cent had been used instead of o, the annual tax
would have been 16 cents instead of 8^ cents. A change of a
single unit in the rate of interest may double or even treble the
amount of the tax. Evidently the rate of interest is the crux
of the whole theory of the tax on expectation value. To thor-
oughly discuss this problem would require more time than has
been allotted to this whole paper. The following brief sug-
gestions are all that can be given here.

Writers of the technical works on forestiy are inclined to
capitalize forestry investments at very low rates of interest,
2 or 3 per cent being usually adopted. The writer is con-
vinced that these rates are too low, at least for American con-
ditions. To mention only two reasons for this belief: in the

TAXATION OF TIMBER LANDS IN UNITED STATES 9

first place, the risk of fire is so great that no imsurance com-
pany will accept it. In the second place, forestry is peculiar
in the long interval of time which must generally elapse before
the investment begins to yield an income. It is a well-known
psychological fact that such an income will be discounted at a
higher rate of interest than one whose enjoyment is le.ss remote.

Without mentioning other reasons for a high rate, the wiiter
is convinced that, as compared with ordinary investments, for-
estry investments must be capitalized at a relatively high rate
of interest. Five per cent is certainly not too high. It is very
probably too low. This question must be carefully considered
in applying a tax on expectation value.

The selection of the rate of the forest tax, whether a tax
on yield when cut or an expectation value, is simple theoreti-
cally. If it is desired to place the same relative burden on
forests as on other kinds of wealth, the rate on expectation value
should be the same as the actual rate of the general property
tax on true value; the rate on yield when cut is the quotient of
the rate of the property tax divided by the rate of intere.st. If
it is de.'^iretl to offer special inducements to forestry by a lower
burden of taxation, the above rates may be rctluced in any
desired degree.

In order to avoid uncertainty and arbitrary taxation, the
rate of the forest tax should be determined by a State officer
or l)oard, this rate to apply in all parts of the State. Or, the
State may merely establish a maximum rate, leaving to any
town the lil^erty to levy a lower rate, if desired.

It has been shown that in general the scientific principles of
forest taxation may be applied either as a tax on yield when
cut, or as a tax on the capital value of the forest. It now be-
comes necessary to weigh the relative merits of these two
methods of taxation with particular reference to American
conditions.

No sooner is the question raised than the answer forces it-
self upon us, that the tax on expectation value is not capaljle
of general application in the United States. Ihis method
depends on the general practice of forestry, whereas in America
the practice of forestry is the rare exception. This method re-
quires the existence of accurate yield tables for the various

10 STATE AND LOCAL TAXATION

jpecies of trees and for different parts of the country. Only
die smallest beginning has yet been made toward the const ruc-
don of such tables for America. This method cannot be ap-
alied to forests producing an irregular yield. Yet nearly all
the private forests in the United States are of this class.

These consitlerations alone show the impossibility of apply-
ing the tax on expectation value in America at the present time
and for a long time to come. On the other hand, there are
some po.sitiv'e considerations in favor of the tax on yield which
are of the greatest importance. In the first place, the tax on
vdeld avoids the whole problem of the rate of interest, which has
been shown to be at once the most important and the most diffi-
cult theoretical factor in the tax on expectation value. Y hen
a forest is taxed on its yield, the value of the yield and tlie value
jf the tax will bear the same relation to each other, no matter
what the rate of interest, since both are neces.-^arily discounted
at the same rate. The importance of this argument in favor
of the tax on yield can hardly be exaggerated.

Again, the use of the tax on yield relieves us of the necessity
of estimating the future prices of timber. All calculations of
expectation value are rendered more or less untrustworthy by
the great uncertainty as to future prices of timlter. All tlie esti-
mates on this subject must be a matter of more or less skillful
guesswork. The objection to a tax based on such calcinations
is obvious. On the other hand, future prices of timber are a
matter of indifference as regards the principles of the tax on
yield. Since the tax is a certain part of the yield, changes in
price affect both the yield and the tax in the .^ame way.

Similarly, by basing the tax on yield, we eliminate the ele-
ment of risk from the tax problem. The danger of loss by fire,
etc., is so great that forestry investments are at be.st decidedly
uncertain. This risk, as is shown above, should be taken into
account in determining the rate of interest. But no one can
estimate the degree of risk with any approach to accuracy, and
no allowance in the rate of interest can prevent serious injustice
being done in individual cases. An owner may have been pay-
ing taxes on his forest for fifty years, only to see the yield at
last wiped out by a destructive fire. Moreover, such a system
would act as a deterrent influence against forestry investments.

TAXATION OF TIMBER LANDS IN UNITED STATES 11

When the annual taxes to be paid are a sure thing, while the
yield to lie obtained after fifty years is very uncertain, we can-
not blame the investor for hesitating. All this is avoided by
the tax on yield. Taxes are paid on the yield, and if the yield
is destroyed by fire, the taxes are thereby automatically re-
mitted. Still other arguments might be mentioned.

We conclude, therefore, that the superiority of the tax based
on vield when cut is demonstrated beyond question. M e maj
then dismiss the tax on expectation value, and confine the
discussion of practical ajiplications and administrative pioblems

to the tax based on yield when cut.

The practical difficulties in the way of any plan of tax reform
in the United States are tremendous. The path toward scien-
tific forest taxation is sure to be strewn with obstacles, more
or less serious. The tax on yield when cut has been ad\ocoted
as an underlying principle. In putting this principle into
operation, no two States would necessarily adopt exactly the
same atlministrative machinery or methods. This paper ob-
viously cannot go into local conditions. M e must, however,
discuss some of the general problems of adminkstiation, and
look into some of the serious practical objections which may be
urged against the tax on yield when cut. The following sug-
gestions are offered.

The chief difficulty with this plan is that it would result in an
irregular and uncertain revenue for many towns and counties.
The following alternative plans are suggested for meeting this
difficulty ; —

(1) Let the tax be administered by the State. Let a rough
estimate be made of the probable average annual yield of the
forests in each town. Then let the State pay the town s share
of the tax on this yield to each town annually. Whenever any
timber is cut in any particular town, the town’s share of the tax
would be credited to it, whereas it would be debited with all
the previous payments from the State treasury with accumu-
lated interest to date. The balance would be carried forward
to the next time of accounting. A large balance on either side
would be avoided by altering the amount of the annual payments
from time to time as experience showed they were too high or
too low. Such a plan would not require an exact calculation

STATE AND LOCAL TAXATION

of expectation value, since no permanent injustice could result
from errors in the calculation of the annual payments of the
State to the towns. This plan makes the State the adminis-
trator of the forest tax and the banker for the towns, thus
guaranteeing to each town a fairly regular income, probably
more regular than the income from taxation of forest lamls to-
day. The State itself has a large enough territory so that the
tax would produce a fairly regular income for the whole State.

(2) The same result might be accomplished in another way.
Let a nominal annual tax be collected from the owners of tim-
ber lands. When the timber is cut, collect the tax on the
yield, and allow a deduction for the previous annual payments,
with interest to date. If, through a mistake, the annual pay-
ments had been excessive, so that, with interest, they exceeded
the tax on the yield when finally cut, a rebate would be due the
owner. This plan would be necessary only for forests produc-
ing an intermittent or irregular yield. Where a sustained
annual yield was produced, the tax would simply be collected
each year, at a certain percentage of the j ield. This plan has
the advantage of great simplicity. It could be administered
either by State or local officers, and the necessary bookkeep-
ing would be very simple.

(3) A third way of avoiding the difficulty of irregular local
revenue would be to make the forest tax a State tax jiure and
simple, compensating the local tlivisions in some e(juital)le way,
as by a payment from the State according to some definite rule,
or by the State surrendering to the local tlivisions seme other
source of revenue. Some such arrangement might be intro-
duced by a State which happened to be remodeling its tax
svstem as a whole.

Each of these plans has advantages and difficulties. Prob-

3^^ eco d would best fit present conditions in the ma-
jority of States. Still other plans might be suggestetl. At
any rate, it seems reasonable to believe that no insuperable
obstacle to the tax on yield will be found here.

Another administrative question is as 1o the treatment of
the small wood lot. To tax everv farm wood lot whenever a
little timber is removed, would be altogether too costly and
cumbersome. It might be advisable to tax wood lots having

TAXATION OF TIMBER LANDS IN UNITED STATES 13

less than a certain area by a somewhat different method. Lots
might be classified into a few grades according to ([uality, the
tax per acre being fixed for each grade at a fairly low figure, and
collected annually, with an additional tax if the lot were ever

entirely cut off.

Numerous other administrative questions might be dis-
cussed, if time permitted. For example, this tax system must
apply to timber lands only. The laws must be so drawn as to
prevent the holding of land for merely speculati\e puipose»
without taxation, on the ground that it is timber land. Again,
it might be necessary to make some special provision for the
man who, having planted trees, changes his mind and cuts them
off before they have grown to any great value. The small tax
on the value of the cut might not be a fair compensation for the
preceding years of exemption. Again, shall the owner of ma-
ture timber be allowed to hold it indefinitely without taxation,
or shall he begin to pay taxes as soon as the timber reaches
maturity? Some administrative problems would aiise, due
to the transition from the present to the new system. For
example, a mature forest which is cut just after the new plan
has gone into effect, could not equitably be taxed on its }ield,
since it has presumably paid its full share of taxation during all
the years that the trees have been growing up. Similarly,
an ecjuitable compromise would be necessary for timber which
w’as partlv grown wdien the new' plan was adopted.

It may be asked : What will be the effect of the proposed tax
on the revenue of the States and local divisions ? To be accurate,
this question must be answered for each State in the light of
local conditions. In general, it is not believed that the tax
on yield will lead to any serious reduction of revenue. If,
as the evidence seems to show', forests are as a rule not excess-
ively taxed to-day, there is no reason to expect any great
reduction of revenue through the adoption of 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 abandoned lands paying
no tax at all. This is assuming always that the rate is selected
so as to make forests bear the same relative burden as other
kinds of wealth. Of course, if it is proposed to favor forestry

STATE AND LOCAL TAXATION

by a special low rate, some revenue will be sacrificed. This
is a matter which we have not enterefl into, as it is not strictly
within the province of this paper. The v'riter is of the opinion
that if a tax at once equitable and dependable is guaranteed,
the business of forestry will not need to ask special favors.

^ The plan of a tax on the yield of forests at a special rate, in
lieu of the general property tax, will be unconstitutional in many
of the States of the United States. These State constitutions
stand to-day in the way of many plans for reform in State and
local taxation. The movement toward their amendment is grow-
ing, as a part of our general program of tax reform. If the plan
of forest taxation hei'e proposed wins favor, it will simply be an
added argument for the speedy amendment of those State con-
titutions which are blocking the progress of scientific tax reform.
The writer has made some study of the taxation of forests
in European countries. On account of the necessity of making
this paper brief, it has seemed best to leave out this part of the
subject entirely. Forestry comlitions in Europe are so much
moie ad\ anced than with us, that the pi'oblem of taxation is
less difficult. The prevailing tax systems of European coun-
tries are likewise very different from ours, the general property
tax having been abandoned long ago. In general, European
countries base their forest taxation on a combination of ground
tax and income tax. The ground tax is liased on the average
productive power of the forest, estimated from time to time.
The income tax is liased on the actual income produced.

In conclusion, the general property tax, though it has not
yet produced widespread disaster, is nevertheless thoroughly
unscientific, particularly as applied to forests. It is arbitrary,
uncertain, unequal and unjust. A change ought to be made in
the interest of forestry. The tax on the yield when cut will
avoid all these evils. It will be equitable and certain. Above
all, it will be in harmony with the peculiarities of the business
of forestry, and will Ije a distinct encouragement to the practice
of forestry. The administrative problems connected with its
application are many and great, but they are not incapable of
solution. And incidentally the adoption of this plan will be
one more step toward the abandonment of the antiquated and
iniquitous general irroperty tax.

I ^

TAXATION OF FOREST LANDS
By a. C. Shaw

Principal Examiner, United States Forest Service

The spirit of the constitutions of English-speaking countries
prohibits unjust and excessive taxation and requires that the
burdens of government be distributed equally among the people.
True equality must consist in equality of sacrifice, and each
citizen should be required to discharge the burden according
to his ability. Because of this principle military service is
required from the young and physically strong, since they are
best able to supply it.

Taxation has always been considered an incident of sover-
eignty and coextensive with it, and very few limitations on the
taxing power are found in the early constitutions of the States
of the United States, and I believe that few such limitations are
found in the Canadian constitutions at the present time. After
the creation of the original States the constitutions of some later
States, which may be referred to as a second class of constitutions,
undertook to prevent inequality of taxation by general con-
stitutional limitation. The purpose of such limitation was to
dispense with officeholders who might discriminate in favor
of one class and against another, and whose salaries formed a
large item of public expense. This limitation was generally
expressed in a requirement that taxation should be uniform and
equal and according to valuation. From this requirement arose
the general property tax, which might be defended if all classes
of property were equally productive and all classes of property
holders equally able to manage their property, and if the public
derived the same benefit from all classes. None of these con-
ditions, however, exists; and later constitutions permit the States
to classify property for taxation so that it may be taxed accord-
ing to its earning capacity or ability to pay, and provide that

If) STATE AND LOCAL TAXATION

other proj^erty may be exempted from taxation to the extent
that it performs a public service which would justify exemption
in whole or in part. Reduction in taxation by classification or
exemption is also justified if made for the purpose of creating
a subject of taxation or encouraging enterprises which result in
benefits to the whole community.

I believe the Canadian constitutions have left the taxing
power of their legislatures to a great extent untrammeled.
The modern thought which applies alike to the States and
Provinces of the two governments seems to be that no uni-
form rule can be prescribed for the production of property,
and consequently no such rule for its taxation; and that ac-
curacy of valuation with a broader comprehension of the
public service which may be performed by different classes of
property, as well as the public benefits which may be derived
by them, can only be attained by educated, competent and
honest taxation officials.

The movement cf the last few years in both countries has
been to eliminate favoritism from taxation administration.
But the overburdened have been considered only indirectly by
correcting the charge against the underburdened.

Both the United Statens and Canada were originally endowed
wdth magnificent timber possessions. Both have rapitlly and
recklessly, particularly the United States, invaded these pos-
sessions.

Where the timber w^as located upon rich agricultural land
it W’as an encumbrance, and its removal was necessaiy and
proper. It served no useful purpose except supply and
was in many cases a detriment to the development of the
country.

Of late years in the United States the cutting has been
extended into higher elevations of land and to the watersheds.
The devastation of these watersheds has injured and alarmed
the agricultural interests. The farms of the low^er lands have
been injured by the soil which has eroded and come down from
the mountains and have been inundated by the frequent flood
w'aters wUich the timber formerly held on the mountain sides.
The w’ork of reparation and conservation has begun, and the
United States now has about 150,000,000 acres of nationally

TAXATION OF FOREST LANDS

t -

« t

owned forest lands, mainly along the watersheds of its Western
States. But east of the Mississippi the farm lands in the valleys
are without any such protection except that given by privately
owned tind)er lands. Although the price of timber has rapidly
increased in the la.st decade, it has not checked the cutting in
the Eastern United States, and the demand for protection of
the Eastern watersheds has crystallized into a movement which
is asking for an appropriation of S10,000,000 to buy lands on
the w’atersheds of the Appalachian and White Mountains, in
the Southern and New England States respectively. A doubt
as to the constitutional right to the federal government to
enter upon this work in the different States has dela}"ed the
passage of the bill.

The forest lands forfeited to the State of Michigan for delin-
quent taxes comprise one and one-quarter million acrf*s, and in
California over 500,000 acres. In Wisconsin verv large forest
areas have been forfeited for non-payment of taxes, but in
1907 the legislature authorized the purchase of such lands for
forest reserves. These forest lantls are not worthless, but will
in time yield timber again. They were allowed by their owners
to revert to the State solely because, unprotected as the forests
were, the tax bills for the unproductive period made the in-
vestment too formidable and doubtful.

Private owners of timbered lands complain that over taxation
either forces destructive timber cutting or makes reforestation
impracticalde. In certain communities of some of the States
which are not fully developed it is claimed that valuable farm
lands which are covered by a heavy growth of timber, and which
are held by a few owners, do not bear their just burden of taxa-
tion. Revisions of existing State laws are being made and
considered for two different purposes :

(1) To lower inequitably high taxation of timliered lands so
as to encourage the growth of timber, and in that way to pro-
tect the denuded watersheds and create on property now worth-
le.ss a value which may be the subject of taxation and an article
which may furnish labor to a community; and (2) to increase
inequitably low taxation so as to prevent the holding of large
tracts of mature timber merely for investment purposes when
business requires the cutting and removal of such timber, and

18 STATE AND LOCAL TAXATION

when the timber serves no public purpose which would justify
any modification of its tax burden.

A number of States have passed laws to relieve lands used
for timber growing from excessive taxation. These laws have
extended three forms of relief: (1) Exemption for a period of
years; (2) rebates of taxes; (3) Bounties.

Exemption. — For this discussion it is not necessarv to recite
the laws of the different States which have offered exemptions.
The chief objections to such laws are that they (1) require plant-
ing, and sometimes of unnecessarily large numbers, of trees and
do not apply to natural timber areas; (2) that the terms of
exemption, which in no case exceeds twenty years, and in some
cases are not more than three years, are too short; (3) that they
exempt the land which should be taxed to the same extent as
that used for other growing crops; (4) that this is an unfair
discrimination against owners of land growing other crops;
and (5) that they provide no method for continuing the use of
the lamls for forest purposes after the expiration of the term
of exemption, and therefore fail to confer a permanent relief.

Rebates. — The offering of rebates is contrary to the pro-
visions of the constitutions of most of the States and where
operated has not proven successful, and laws for this purpose
would necessarily be difficult of administration.

Boimties. — A number of States, not necessary to name
in this discussion, have passed forest or timber bounty laws.
Only that of Minnesota has proven in any measure successful,
and that was operated at an excessive cost. All such laws are
objectionable as class legislation.

The public interest, which has demanded relief from excessive
taxation of timber lands, recognizes that it is necessary to change
existing laws so as to protect the watersheds, which in turn
protect navigation and farms and manufacturing industries
along the streams; to check the system of reckless lumbering
encouraged by present laws ; and to prevent loss to the States by
unnecessary depreciation of one great item of their taxable
wealth. Although such legislation is necessary, its enactment
without due consideration to other property and industries in
order to prevent discrimination and injustice woukl be most
unwise. The farmer has frequently to bear the largest pro-

TAXATION OF FOREST LANDS

portionate burden of taxation in both countries, and new forest
taxation laws should not discriminate against him; but it
should not be forgotten that one of the most important services
of the forest is to protect the farm from erosion and inundation.
It should also be rememl)ered that if reduction of taxation on
land used for ])romoting foi'est growth will secure the reforesta-
tion of cut-over and now worthless land, such forest growth
may become an item of wealth for the community and a subject
for taxation, and tliat the ta.xes of the farmer in that comniunitv
will be reduced.

Theoretically, at least, the potential income of all property
is the best basis for taxation, but it is impractical of ascertain-
ment and could not be constitutionally adopted in many of the
States. While fair taxation is desired to encourage reforesta-
tion, it is much more necessary to prevent fore.st devastation;
and if relief must come through constitutional amendment,
which is always slow, it will fail to check the ravages which
commercialism is now making upon the forests. Some con-
cessions must therefore be made to practicability.

Principles of Forest Taxation. — It does seem to me that much
improvement can be made if in seeking relief from over taxation
of the forest the following principles are borne in mind:

1. The tax should be based upon the earxixg capacity
OF THE LAND TAXED. In accordance with this principle, land
upon which is located immature timber, which cannot and
should not be marketed, should not be required to pay an annual
tax on its full value, including such timber, during the time of
the immaturitv of the timber.

2. Public necessity requires that the w.\tersheds of

STREAMS should BE PROTECTED BY A GROWTH OF TIMBER. Ill

accordance with this principle, the legislature would be justified
in exempting from taxation such areas of matured timber upon
the watersheds as are necessary to protect them by insuring a
permanent growth of timlier upon them.

3. Taxation upon land should be as nearly equal as
PRACTICABLE. Ill accordance with this principle land upon
which timber is grown should lie assessed at its real market
value in the same way as land upon which other crops are
grown.

STATE AND LOCAL TAXATION

4. Gkowixg timber should not be subjected to a rule

OF TAXATION HIGHER THAN OR DIFFEREVT FROM THAT APPLIED
TO OTHER GROWING CROPS. Since Other growing crops are
either actually or practically exempt and are really subject to
taxation only when severed from the land, timber should be
given the same exemption while growing and unmerchantable
especially since the time of realization upon timber is necessarilv
deferred for a much longer time than that from other crops and
since the timber owner takes additional risk from fire and dep-
redation. Persons investing money in any enterprise desire
ceitainty of the conditions of their investments, and any ex-
emption of immature timlier should be based upon reasonable
certainty as to duration, but the State should be protected from
undue extension of the time of exemption.

5. Matured or merchantable timber not needed for

WATERSHED PROTECTION SHOULD BE SUBJECT TO TAXATION
WHETHER THE OWNER CUTS IT OR NOT. If a scheme of ex-
emption for growing timber is adopted, it should contain a
safeguard aga.nst the exemption of matured or merchantable
timber held for speculation and investment purposes.

6. It is within the legitimate province of tax l\ws to
encourage the growth of timber for the purposes of
insuring a future timber supply for the public needs and
OF protecting watersheds of navigable and unn.vigIble

STREAMS.

7. The owner of any property exempted from t^x^tion
for reasons of public policy may JUSTLY BE REQUIRED TO
RELINQUISH TO THE PUBLIC, DURING THE PERIOD OF EXEMPTION
ANY RIGHTS THEREIN, THE RELINQUISHMENT OF WHICH DO NOT
INTERFERE WITH THE PURPOSES TO WHICH THE PROPERTY
IS DEVOTED. Large tracts of timber land on watersheds which
may seek relief from over taxation might also be held for
private parks and pleasure resorts. The owners, in return for
the benefits bestowed by exemption of the timber, might well
be required to allow such use of the lan.ls by the public for
health and pleasure as might reasonably be stipulated.

_ This additional concession to the public would certainly
justify additional consideration by the taxpayers on the
forested lands from the legislature and preyent such con-

TAXATIOX OF FOREST LANDS

sideration from seeming to be a discrimination against the
( public.

The separation of timber and land for taxation purposes
would tend to promote accuracy in yaluation.

\ The constitutions of some of the States do not permit the

exemption of timber from taxation. In such States a further
concession should in my opinion be made to expediency, and if
such States permit the classification of property for taxation
purposes it would be entirely reasonable to place immature or
unmerchantable timber upon land chiefly valuable for timber
' growing or watershed protection in a separate class and to tax

it at longer than yearly intervals or at a lower rate than other
property which does not perform a commensurate public service.
In other States relief can be given only by constitutional
amendment. In my opinion it would be easier to secure amend-
ment along lines for which there are precedents, and since
exemption has been so often given for property which performs
a public service, and since the right of classification is allowed
in many of the States for reasons of public policy, I believe
it would be easier to secure amendment along those lines and
on the principles here announced than to undertake to revolu-
tionize the entire theory of the taxation laws. Unless the law to
allow classification should also allow a variance of the intervals
between payments, exemption is preferable.

’ It is not forgotten that it will be necessary to provide efficient

officers to determine what timber property can give the public
protection which is desired and what land is not more valuable
for some other purposes; also to fix rules to determine when the
timber becomes merchantable ami should be taxed. Similar
difficulties have been encountered in administering the laws
which provide better facilities for taxing public service cor-
porations, but they have not been insurmountable; and since
forest education is making great strides in the different States
of both countries, it is believed that foresters may be secured
who can administer an improved forest law along the line
indicated.

The Supreme Courts of the United States and of the States
of Maine and New Jersey have recently announced decisions
■ which indicate a belief that the State has a right to regulate

■4

STATE AND LOCAL TAXATION

cutting upon private lands or protect forests and stream flow

on such private lands because of the public service of the forest
and the streams.

The I resident last year called in conhn’ence the Governors
of the different States for the purpose of formulating plans to
conserve the natural resources of the United States. This
action was not taken because such resources have been ex-
hausted, Init because they are being wasted, and because there
IS a tendency to their monopoly. The importance of this ques-
tion entirely surmounted party politics. A voluntary, unpaid
and patriotic Congress will meet in Washington in the early
winter to formulate and recommend conservation legislation.

It IS the duty of each generation to prepare for its succe.ssor
at least as favorable an opportunity for success and happiness
as It has enjoyed. The forests and streams, the fuels and the
metals, will be as necessary to succeeding generations as they are
to this, and no man who loves his family, his race or his country
can fail to appreciate the importance of constructive legislation
for the conservation of our natural resources. And I believe
that legislation to provide a fair taxation for such resources is
of prime importance.

For tlie information of those who may be interested in these
remarks I have prepared a table to show in which of the United
States the relief must come through exemption, classification
or constitutional amendment.

If I have overlooked important features of Canadian con-
stitutional requirements or perfection of Canadian laws, I hope
It will be attributed to my lack of opportunity to inform myself
fully as to such constitutions and laws, an(l not to my lack of
appreciation of the admirable features of that government,
the wonderful resources of that country, or the energy and
patriotism of its citizens.

It has been my good fortune to visit the Provinces of Ontario,
Manitoba, Saskatchewan, Alberta and British Columbia’
and to learn of the wonderful forest, mineral (metal and coal)
and water-power resources which are yet open to exploitation,
acquisition and development in the Rockies, the Selkirks and
the Coa.st Range. I have seen the new 'communities of the
V\ estern provinces and have found there a happy and prosper-

•>

•1

TAXATION OF FOREST LANDS

ous people, made so by the opportunity which wise laws have
given to indivitlual energy.

The following table shows which States may classify, wiiich
may either exempt or classify and which may neither exempt
nor classify, but must amend their constitutions to give relief.

These States may

EXEMPT

These States

MAY classify

These States may
either exempt or
cl.\ssify

These States may
neither exempt
NOR classify, but
MUST amend their
constitutions to

GIVE RELIEF

Alabama

Arizona

Arkansas

Arizona

Colorado

California

Colorado, planted

Connecticut

Florida

forests

Delaware

Illinois

Connecticut

Georgia

Idaho

Indiana

Delaware

Iowa

Kentucky

Idaho

Montana

Louisiana

Kansas

Minnesota

New Jersey

Nevada

Iowa

Missouri

New Mexico

North Carolina

Maine

Montana

New York

North Dakota

Maryland

New Jersey

Rhode Island

Ohio

Massachusetts

New Mexico

Vermont

Or(‘gon

Michigan

Mississippi

Montana

Nebraska, planted
forests

New Hampshire
New Jersey
New Mexico
New York
Rhode Island
Vermont
Wisconsin

New York

Oklahoma

Pennsylvania

Rhode Island

Vermont

Virginia

Wyoming

Massachusetts

Michigan

Minnesota

Vermont

South Carolina

South Dakota

Tennessee

Texas

Utah

Virginia

Washington

West Virginia

FOREST TAXATION AND CONSERVATION AS
PRACTICED IN CANADA

By Dean B. E. Fernow

Faculty of Forestry, University of Toronto, Toronto, Ontario

I TAKE it for granted that the title of the subject assigned
to me means, to establish a relation between forest conserva-
tion and taxation in Canada. As a matter of fact, such relation
does not to my knowledge exist in Canada. Indeed, attempts
at any kind of forest conservation are so few and inefficient in
this country that we can hardly yet recognize them as actualities.

In the United States the subject of taxation has been for
some time as one which is of importance to the development of
forestry practices in the handling of timber lands, and the dis-
cussions have charged the absence of such practices to excessive
taxation, which forces the lumberman to be satisfied with mere

rapid exploitation of his property instead of management for
a future crop.

It is argued that the practice of forestry needs protection
which would be induced by reduction, if not entire relief, of
taxes on timberlands under certain conditions. Indeed, there
are tax release laws on the statute books of several kates.
But, if in the States such a relation between taxation and forest
destruction could be proved, — ! have been on record for years
as disbelieving this relation, and am glad to hear that the
extensive investigations of Professor Fairchild have proved my
views correct, — in Canada, certainly, the unconservative ex-
ploitation of her timber resources has not been due to excessive
taxation. The bulk of the timber lands are in the ownership
of the Dominion and provincial governments as crown lands,
and, therefore,^ do not pay any taxes. An attempt on the part
of some municipalities in Ontario to levy taxes from the timber
limit holders, who acquire the right to cut timber under license

STATE AND LOCAL TAXATION

from the government, failed lately, the courts deciding that
no tax could be levied against the timber on crown lands; and
in some other cases in which a timber limit holder tried to
collect damage from a government-controlletl railroad for de-
struction of timber by fire, the full ownership of the land in the
crown, in spite of having given the right of despoiling it of its
value, has been sustained.

The taxes against private forest lands, on the other hand, are
so low that owners do not seem to find any reason to complain,
nor is there usually a change made in the assessment when the
timber is cut, although there is no uniformity in the methods of
assessment, and every tax assessor is a law unto himself, as in
the States.

There is, therefore, no clamor for tax reduction, and no influ-
ence of taxation on the treatment of forest property.

Nevertheless, some enthusiastic member of the legislature of
Ontario, believing that it was desirable to encourage reforesta-
tion of wa.ste lands, especially in the peninsula of Ontario, —
which is largely deforested and suffers, indeed, in parts, from
both lack of wood supplies and of forest cover, — had an act
passed in 1906 (G Edward \TI) permitting the council of a
township to exempt “ woodlands” in whole or part from munici-
pal taxation, not more than one acre in ten, and not more than
25 acres held by a single owner. The desm-iption of woodlaml
in the act is interesting, having in view a park rather than a
timber forest. It requires 400 trees per acre of all sizes, or
300 measuring over two inches, or 200 over 5 inches, or 100 over
eight inches in diameter, naming the species permissil)le.

No results of this “beneficial” legislation are on record. But
the existence of this statute may give me an excuse to discuss
the possible efficacy of such legislation.

While, no doubt, the tax power can bo used to encourage
or discourage certain practices, it must not be overlooked that
other powerful influences are also at work, Avdiich may encourage
or discourage the other way.

Rising prices in the market are persuasive arguments for
cutting now, destructive fires threaten pn^sent utilization, the
long time element in the maturing of timber discourages the
average man from placing his funds in such investment.

FOREST TAXATION AND CONSERVATION IN CANADA 27

Is it not patent that the artificial encouragement of the tax
relea.se must l>e in proportion to the forces which pull the other
way ?

Where uncut virgin timber lands are concerned, the rise of
price of wood, which for the poorest woods has doubled in the
last decade, is a greater incentive to cut than anv tax reduction
could ever be. When cut-over lands are concerned, the mere
let-alone policy is no virtue to be rewarded, but an unfortunate
nece.s.sity which the owner cannot help. Unless he does some
tangible work towards improving the crop and replenishing the
poorly stocked areas with desirable kinds, he is not entitled to
consideration. When new plantations are concerned, the initial
expense of planting is so much greater than the capitalized
value of any tax release, that the latter could hardly be con-
sidered an incentive to make the expenditure of the former.
Few good plantations could be made for less than SS to SIO
per acre, while the capitalized value of a tax of 10 cents per
acre, an excessive figure for a period of 20 years, the time
usually provided, would not amount to more than SI. 25.

An equitalde tax is all that foresters need and should ask for.
Since, however, an acre of timber yields only periodic I’eturns,
the greater part of the tax should fall due when the timber is
cut, the deferred tax bearing a fair relation to the net yield of
the property. The same principles a century or more of expe-
rience has shown to be correct in Germany are applical)le here,
albeit with some minor modifications in practice. They recog-
nize that annual taxes are necessary to levy, since administra-
tions need funds annually and cannot be dependent on the whim
of ownei'S as to when and how much they propose to cut, and
hence a regular annual tax mu.st be levied. At the same time
the intermittency and irregularity of income from forest projjer-
ties is recognized, on account of which, in the absence of income,
the payment of taxes is a hardship. This clash of public and
private interest is overcome by a mixed taxation, namely, a
land tax levied as the stumpage becomes available. Where a
sustained yield management exists, i.e. one so arranged that
the forest property yields an annual cut continuously — a condi-
tion now very general in Germany — the value of the “ growing
stock ” — that is, the wood capital represented in the series of

0§ STATE AND LOCAL TAXATION

stands of different age which must be in existence to permit
this annual cut — forms the basis of the assessment in addi-
tion to the soil capital, based on the productive capacity of the
soil — the ‘^soil rent” value. This productiveness is deter-
mined once for all by experts. Even with us, there would be
now enough knowledge in existence to make approximate
estimates as to whether certain soils are capable of producing
at least one half, or three quarters, or one cord, etc., per acre.

It will of course be the lowest, the “wrecking” value, not
the highest or best production, that would form the basis of

4lSS0SSllldlt .

In Wiirtemberg a revision of the tax law was effected in 1905,
following closely the Prussian precedent. Both State and
county taxes are assessed against forest pro)ierty. For State
purposes the taxable income is the actual result, cash or
of the regular cut, principal and intermediary harvest. The
domestic consumption of the owner at local average prices is
considered income as well. Extraordinary cuts are taxed it
they are made to secure cash or to change the use of the area,
as iov farm purposes; but, if occasioned by natural disaster,
like windfall, insect pests, snow breakage, etc., the results are
not considered taxable income, for this enforced cut is con-
sidered a misfortune, a loss against the owner’s interests, because

it disturbs his regular management.

As expenses are charged, not only all the usual expenditures

incurred in the management, but the cost of new plantations
also, and bad debts of former years if they had been figured as
income, but costs occasioned by extraordinary cuts, including
those of reforestation, do not figure any more than the income

from such untimely utilization.

Besides this income tax the hitherto customary realty or soil
tax is continued at a reduced rate. This is based not on the
income, but on the possible net yield, -tlie possibihte o the
French, -and this yield capacity is determined once for al bj
experts, after classification of the land according to qua i j .
This assessment of the so-called “tax capital,” which does not
consider individual conditions or special methods of manage-
ment, is supposed to hold good for a long period, and is changec
onlv when changes in use and in property conditions arise.

FOREST TAXATION AND CONSERVATION IN CANADA 29

For municipal taxation this tax capital forms the basis, the
annual county or town expenditure, as far as not otherwise
satisfied, being apportioned among the owners. The rate on
the tax capital varies from year to year, and in 1906 was twenty
mills — the same as on real estate in Toronto. The rate on
incomes is determined every two years. The law, however,
states a normal rate on a sliding scale which varies between
two and five marks, according to size of income.

It will, to be sure, take a long time before such scientific pro-
cedure will and can be applied under our crude conditions, but
it points the goal towards which eventually we must tia\el.

There is one other form of taxation which has sometimes
been believed to have a bearing on forestry practices, namely,
a customs tariff. I remember a committee of lumbermen
waiting on me at ashington to ask me to assist theii taiiff
agitation by an argument which should show’ that a tariff of
$2 per 1000 feet wmuld promote forestry. I promised to do so,
if they in turn could vouch that at least one half of this tax
on the public would find its way from their pockets into the
w’oods for improved practice. Needless to say, that the argu-
ment was not called for. Where, as in Germany, a well-estab-
lished forestry system needs protection against the imports
from exploiting countries, the argument might appear reason-
able; but as a matter of fact, even there the tariff duty was
counterbalanced by a reduction in freight rates of the exploit-
ing countries, and has not had the desired effect. Theoretic-
ally, an import duty on lumber should make timber lands so
valuable as to induce the conservative use of them ; practically,
such a result has not been experienced, the present dollar being
a greater attraction than the possible future two.

But, while forestry practices may not be induced by tariffs,
industrial development based on a domestic supply of raw’ ma-
terial may. WTiether, for instance, the pulp wood of Canada
should be sent to United States paper mills, or, by preventing its
export, the estaldishment of such mills in Canada should be
fostered, this question is one of greatest fiscal importance to

Canada.

I mav add only a few words regarding a feature in the
administration of Canadian timber lands which apparently be-

•<3

STATE AND LOCAL TAXATION

longs to the subject in hand, as it involves at least a sem-
blance of taxation which has a most important bearing on forest
conservation.

In (lisj)osing of timber limits the governments divide payments
into three parts, namely, a bonus, i.e. a lump sum bid which is
paid at time of securing limits at an auction; timber dues per
unit (cubic foot, cord, feet board measure) collectetl when timber
is cut; and a ground rent, whicli, being paid annually, appears
like a tax, but in reality is only a fee paid to retain the right
to cut timber on the limits. It is levied per square mile, is
uniform, i.e. independent of values, and mostly nominal, from
S2 to S8 per square mile, except in British (A)lumbia, where it
is SI 40.

This latter amount ought to be large enough to deter, or at
least check, speculation, which it apparently has not done, and
it may be instrumental in hastening forest destruction. After
nearly all the available timber in the provinc<j has been covered
by licenses which are to run for 20 years, the argument is made
by the limit hoklers, that they will l)e forced to practice de-
structive lumbering, while if the licenses were made perpetual,
they might be induced to ju-actice forestry.

The writer is not convinced that other factors, like the fear
of loss by forest fires, the requirements of establishetl mill
capacities, and especially the golden harv(ist which rapidly
rising wood prices promise, will not be stronger influences
toward a continuance of present destructive practices, than
either a reduction of the ground rent or a per])etual exclusion of
the government from managing its property rationally.

That the present methods of disposing of timljer on crown
lands are most inimical to forest conservation could be readilv
proven. This is, however, not a question of taxation, which,
as I have shown, is in Canada as yet of no moment, but may
become so, in the not very distant future, when the incomes of
the province from the timber limits shall have ceased, because
the commercial timber is exhausted.

DISCUSSION AND CRITICISM

DISCUSSION ON FOREST TAXATION

Chairman; This subject is now open for discus.sion.

1\Ir. Lawson Purdy (New York) : Mr. Chairman, I don’t
know enough to discuss this subject very much, but I cannot
allow the opportunity to go by without saying that I have
heard a great many papers on taxation, a very great many
papers, and I don’t know when I have heard papers so clear, so
well reasoned, devoted to subjects of such supreme importance
as the papers to which we have listened to-night. (Applause.)

Mr. ,I. H. Easterday (Washington) ; I come from the State
of Washington where 160 acres may have timber to the reason-
able value of Si 00,000. In the past we have valued this timber
in the same haphazard manner as is spoken of by the Professor
from A ale. ^\ e have now reached what we believe to be a
scientific method in which practical equality is done to all
timber landowners under the present law. Timber trees have
the same value as a sheep, a cow or a horse. That is, a small
tree is worth S2, larger trees are worth $25, and many trees
are worth $100. If your assessor should go into a field and
come back to the assessing board and say, “ I have valued
160 acres of sheep,” the boss would say something that I don’t
care to repeat, and send him back to count them. We have
counted our trees, and when we count the tree, we estimate its
value. The report that comes in shows every foot of timber
on every subdivision of ten acres. It shows the character of
the timber. It shows whether it is mature or second growth.
It shows the number of commercial poles and ties. It shows
the contour of the country. It shows the revenues and the
accumulations and everything else pertaining to a full and
complete knowledge of that 160 acres of land. It cost some
money to do this the first time, but when you once have that
cruise, it is good for fifty years. A high school boy can sit
down, and taking the market values of timber, or the accredited
ratios of increase, can figure over any 160 acres in your town-
ship or State in a very short time. Not to go at this in a

■i

32 STATE AXD LOCAL TAXATION

practical way seems to me to be folly; and whatever may be
the ultimate result of exemption, or this or that or the other,
one of the first things to be done in a practical way is to count
your trees. The owners of this property will report from time
to time of burnings or of cuttings, and reductions can be made.
You have a complete map, a complete record, and you have it
for all time to come. In the State of Washington this cruise
of the timber lands and the counting of tlu; trees not only re-
sults in doubling and trebling the valuation of ail timber lands,
but it puts practical and approximate equality between owners
in ascertaining the lands that were heavily timbered and those
which had no timber. I would call attention again to the
benefits of tins practical cruise and contour and exploitation
to vour commissioners who build the roads. It will be a benefit

to buyer and to seller. It will be a benefit to prospective log-
ging roads or prospective railroads. In fact, the lone fisher-
man can well study these maps, and perhaps get an inkling
or a notion as to where he can do best in the day’s outing with
the rod and reel. (Applause.)

Mr. F. M. Lee (Mississippi) : The gentleman from Washing-
ton has somewhat the advantage of me. Every two years our
timber lands are estimated and assessed. Once in two years
this is done. The lands are valued differently. They are
valued in proportion to the lumber that they will yield, or to
the worth of the timber that then is on them. For that rea-
son I say the gentleman from Washington has considerably the
advantage. We are certain we could not let it last for fifty
years, but it only lasts with us for two years and must be
repeated. The timber that has been taken off in that two
years has then reduced the stumpage, and it is assessed at a
lower price. For instance, our timber laml is assessed, much
of it, at S20 an acre on down to $2 an acre — lower even than
our farm lands, because the farm land is bringing something;
there is something being taken off; sometliing for the benefit
of the country. But the stumpage has nothing except its
market value. That is about the way we handle our business,
and we feel satisfied that we are doing nicely. As fast as the
timber is taken off the land is put into cultivation, because it
is alluvial and productive land. Thereby we build not only

DISCUSSION AND CRITICISM

cities right around us, but we are aiding foreign countries
because we are furnishing traffic. (A pplause.)

Du. W. I. Uhambeklaix (Ohio) : It seems to me that one
very great question has not been exploited here in the matter
of forestry to the extent that it would Ijear. Ohio is suffering
deforestation, and the tendency and the thought now is to
reforest our State to some extent. Before ant’-body had appre-
ciatetl the fact, the forests were in a large tlegree removed, and
their absence has exei’cised a very tlisastrous climatic effect in
our State. Tliat is to say, our State in large degree is rolling,
and when we are blessed witli rain the trees, the humus and the
leaves in the forest take up that rain and hold it and release
it as it is needed, whereas when the forests are gone we are
subject to freshets and drought. Now, it seems to me that
that has not been brought out. Of course in Washington
they have very fertile soil; their State is new; but in the older
States the pioneer farmer deforested our State. The mill and
the farmer have rol)bed it of its fertility, and the modern thought
is that the modern farmer has got to restore both. {Applause.)

Mr. J. J. Thomas (LTah) : I would like a little explanation
as to the conclusions that both these gentlemen came to —
as to how the remitting of the taxes would result in replanting
those lands from which the trees have been taken. Would
the remitting of the taxes induce men who have gone upon this
land for the purpose of taking this timber, and wlio have sold
it to some lumber company, would that induce them to replant
the land? I confess I have some doubts on the suljject.

Mr. Shaw: I heard that answered in Michigan. I heard
Mr. Ward, who is the largest timber owner in Michigan, and
Mr. Limlen, who belongs to an estate that is the largest timber
owner, say that they would undertake it. That is in the State
I mentioned that has six million acres on its delinquent tax
list, and they are utterly worthless; nobody is doing anything
about it. The taxes in Michigan are locally assessed, and in
some cases excessive, but it would certainlv be an item anv-
where toward forestry, and in that State which presents about
the worst and most extreme condition, these men with the
ability and the funds and the experience said they would under-
take the work.

34 STATE AND LOCAL TAXATION

Mr. Thomas: By remitting the taxes, do you mean from
the time the trees are planted until they reach sufficient growth
to cut again ?

Mr. Shaw: My proposition was sonuuvhat different from
Professor Fairchild’s — to tax the land at its actual value all
the time.

Mr. Thomas: That is what I was getting at.

Mr. Shaw: Never release that, becaus<i a farmer that raises
something else has to pay taxes on his land, and he would not
assent to that discrimination; but exempt the timber until
it could be reasonably cut, until it was nn^rchantable, and then
tax it.

Mr. Purdy: In the State of California, I believe I am cor-
rect in saying the constitution provides that land under culti-
vation shall not be assessed at a higher rate than the land
similarly situated which is not cultivated.

Mr. Shaw: Yes, I understand that.

Mr. Purdy : The principle which is embodied in the Cali-
fornia constitution would be applicable if the forest is treated
and considered as crop, which undoubtedly it is, only it is one
of slow growth.

Mr. a. C. Pleydell: This is a very practical matter in New
York. There was a bill before the last legislature to encourage
the reforesting of lands by exempting all growing timber from
taxation until it had reached maturitv. This was the intention
of the bill, and I was in conference off and on for two or three
months both with the Forest Service and members of the
legislature. The bill was amended several times, but not to
the satisfaction of the New York Tax Reform Association, and
finally they protested to the Governor, who vetoed it; the
principal protest was against the feature which Mr. Shaw has
pointed out as a possible danger in forest exemption laws.
The bill unfortunately provided that when the land, no mat-
ter what its value, was replanted, it should not be valued at a
higher rate than the most barren land in the tax district. This,
as was clearly shown, would encourage speculation in sub-
urban lands, in some instances even in tlie city of New York.

It is a proper thing to encourage forestry. More trees are
needed in New York, — that State is different from Washington,

% t

DISCUSSION AND CRITICISM

and there is a tendency to check reforesting by the tax

burden. You all know that trees are a fifty-year crop, and
when you put them on the roll every year, they are taxed lift}
times before they are cut.

The practice in New York ami New Jersey is not really to
add much to the assessment — in most cases to add nothing
to the assessment — of ordinary farm land because it has
some woods on it. The assessor puts down fifty acres of cleai
land on the same basis as a similar tract that has some trees
on it. But where a man undertakes to reforest his land
scientifically, and the trees grow well, the assessor looks upon
that just as he looks on the repainting of a building, or the
putting up of a new barn. — as something that must immedi-
ately go down on the tax list. The purpose of the forestiw
department is to encourage reforesting by exempting the trees
while immature, and assessing the stumpage when the trees are
cut. I am in entire sympathy with the view expressed by Mr.

Shaw.

It seems, furthermore, that there are two things to be borne
in mind in discussing the connection between forestry and
taxation :

First, to encourage the growth of forests so as to preserve
watersheds, we must do one of two things — either make
some special provision or agreement with the owners of that
land by which, in return for exemption, they will let their
matured timber stand so as to protect the watershed within
a certain area, or have the State own the watershed land, as is
largely done in the State of New Aork.

Second, to encourage the general growth of timber through
the counti'v districts which are not the chief watersheds, we must
exempt the trees from taxation, automatically, without any
forest inspection, so that the ordinary farmer can get the
benefit of whatever exemption is granted to his wood land on
the basis of a fifty-year crop. The ordinary farmer should
be able to get that exemption without going through any
red tape and applying to headquarters to have his land in-
spected; that is more routine to which he is not accustomed.

It seems to me the true principle that we must come to
is to value timber lands as if the land were stripped of trees;

STATE AND LOCAL TAXATION

according to what it would be worth to own that land as an
opportunity for planting trees or other uses. Then exempt the ’

growing timber, at least until such a time as it is a marketable
crop, if we cannot have entire exemption. We may have to
compromi.^e with some kind of a stumpage tax that will put a
low rate on timber.

Mr. ^\ iLLi.\M B. Fellows (New Hampshire) : I wish somebody
would answer this question. Now we have a “General Prop-
erty Tax,” as it is termed in the United States, and we shall
have it until more joeople become more conscientious than they
are down there; in other words, they won’t pay an income tax.

Now, what is there between man and man? A person has got
a house worth $5000, and it is taxed presumably for that.

Another man has a piece of timber land which will readily sell
on the market for $5000. Is there any reason why he should
not be taxed for $5000 while the other man is taxed for $5000?

That is a question that is troubling us somewhat. New Hamp-
shire has been referred to. Mr. Foster, who represented the
department in Washington, was there some months this sum-
mer, and he found prevailing those conditions that have been
spoken of here to-night. His conclusion was that although
what was done there was done illegally, yet practically the
problem would be solved by the practical exemptions made
by the selectmen. Now, it w’ould be dilhcult to reforest the
M hite Mountains of New Hampshire. They are owned largely
by the farmers, who want to get money out of the timber, and
will get the money out of it so long as they can get their price
without any question of what they are to be taxed. If the
State of New Hampshire or the United States should make a
forest estate of New Hampshire, there would be hardly any
land left for an individual person, because you know that about
all New Hampshire is set up on edge. {Laughter.) That
causes me to present the question, What is to be fair between
man and man in a State like New Hampshire where you tax
property and you tax but little of that? All that we tax now ,

is the real estate and a few manufacturing corporations that
we have got. People are claiming that public service corpora-
tions are not paying enough taxes. I don’t know as they are,
but certainly the timber people that I have knowledge of are

DISCUSSION AND CRITICISM

not paying any greater proportion of tax than are the public
service corporations.

Mu. Pleydell: Answering one point there briefly I would
say that as a house usually takes six months to be put up, we
do not tax a man while the house is growing, and we don’t put
a tax on until he gets the use of it, and we do not tax field
crops while they are growing. In New York the assessors go
out in May when the farmer has sold his crop and has not
planted the new one. In practice they don’t tax the growing
crop, and therefore in practice they should not tax the growing
timber. At present it is taxed every year, and it takes fifty
years to grow.

Mr. Sh.\w: I think Mr. Fellows lost the point that I intended
to make, and that was that the forest was entitled to an ex-
emption if at all because of the public service it performed;
because it helps the water flow; it contributes to the health of
the State; it protects the farms below. Under this scheme,

if enacted, a man will not be at liberty to cut that $5000 of

timber off whenever he feels like it, but he will have to agree
with the State to leave a certain proportion that may be fixed
by a State officer, and let that stay there to perform those pub-
lic services.

Mr. Fellows: The people of Ohio are coming to our State
because they say the question of taxes are so much better
than they are in Ohio. They would rather give up their

residences there and come to New Hampshire and live.

(Laughter.)

Professor F.mrchild: As I look at it, the scientific taxa-
tion of forests does not imply that a forest shall be taxed at a
lower rate than other lands. Whether thev shall be is rather
for the jurist than the economist. The scientific way to look
at it is how the forest can be made to bear the same relative
burden as other kinds of wealth. That is the idea which I am
trying to find a way of putting into practice. But to tax the
forest at the same relative rate as other kinds of wealth does
not involve that since a house is taxed every year a forest should
also be taxed every year. It is perfectly possible to make an
income tax a tax of the yield which shall be exactly equivalent
to a tax on the value. An income tax coming once in so many

STATE AND LOCAL TAXATION

years could be fixed at the same ratio of value as a tax that
comes on a house every year.

Mii. Morrill N. Drew (Maine) : \\ e have an area of about
ten million acres of spruce that is not in the incorporated
townships. Those ten million acres are yielding to the land-
owner from two and one half to three million dollars per annum
net. The property in the incorporated townships and cities
bear a burden of about twenty-one mills on the dollar. This
forest property bears a burden of about five mills on the dollar.
The total tax on wild land in Maine to-day does not exceed
one and one-quarter cents per acre; and with that low rate of
taxation we have seen no wild landowner starting out to re-
forest his land where he can cut over or burn. Now, the problem
with us, and the problem that we have hard work to make the
average taxpayer think is right, is that if he takes S100,000
and goes down in the town and invests it in a manufactory and
helps to build up the town, gives employment to people, he
must pay an annual tax of over $2000 a }ear on his property,
whereas if he invests it in wild lands he pays one quarter of
that tax. It is hard work to make a manufacturer and farmer
see why that $100,000 in the wild lands should not pay at least
as much as he. Mr. Shaw, in talking about exempting the
forest from taxation, spoke of exempting it till it matured,
speaking of fifty or sixty years. In Maine our land may be
different, and also our mode of operation, but the land agent
tells us that those wild lands can yield a crop so as to net the
landowner two and one half million dollars per annum for
them, provided the forest is not burned. We know that men
in operating the spruce only cut the large trees down to 10"
or 12" at the stump, and lumber operators tell me that in so
operating the land if they cut two or three millions off the
township this year in that manner, in ten years from now they
can go over the same land and cut the same amount of spruce.
Now that is one reason why delegations from Maine have come
here, to have Mr. Shaw and others tell us whether or not we
can make the wild landowner pay at least as much taxes, but
not more. We don’t want him to pay more; we want him to
pay at least as much. I would like to ask him if he thinks a
tax of a cent and a half an acre on green land would have a

DISCUSSION AND CRITICISM

tendency to make the wild landowner cut his land hard, or
strip it.

Mr Shaw: That would seem to me like a small tax.

Mr. Drew : Would three cents an acre do ?

Mr. Shaw: I would not wish to answer a question as to a
particular locality without knowing the conditions that sur-
round it. I do not know the conditions in Maine. You are
• .» very fortunate in one thing, as I would gather from your re-

I marks — that the people are cutting conservatively only the

large trees. If they were cutting as they do in Michigan, I
’ " think you woukl be more of an advocate of reforestation.

Mr. Drew: I am an advocate of reforestation, and I think
' when the tax is onlv one and one half cents, it is not prohibitive.

Mr. Shaw: I don’t know the conditions of Maine.

Mr. Drew : We will be glad to have some one coming down
from Washington.

Mr. Shaw: Mr. Pinchot will be glad to send somebody.

Mr. William H. Corbin (Connecticut) : We have a law which
. . exempts tree plantations for twenty years after the growth has

reached a height of six feet, and the result in Connecticut is
that the spare timber is cut off and there has been very little
reforesting. It has commenced a little, but mostly liy people
from outsitle the towns who are wealthv men and have come
in and bought a piece of land and planted forests; but the
’ average owner in the township of the land and the timber has

sold his timber and cut it off and allowed the land to remain
to grow up to brambles. What we want in Connecticut
is something to induce the farmer or the owner of that land,
when he cuts it off, to see that it is to his advantage from a
business standpoint immediately to reforest. That land is
supposed to Ixj taxed the same value as contiguous land that
is not used for forest. So that we have the elements there that
. have been mentioned here; but we would like to know from

the gentleman from Washington on what basis he taxes the
( spruce after he has counted them. Does he tax them at full

N value or at a lower price?

Mr. Easterday: The same as other property.

• Mr. Corbin : Is that an incentive to reforest what has been

' cut off ?

40 STATE AND LOCAL TAXATION

Mr. Easterday: I don’t know.

Mr. James M. Brown (Ohio) : I would like to ask the gentle-
man from Connecticut what he thinks could be done in the
way of taxing, or exemption from taxation, to induce his
neighbors to fertilize and produce the trees from the land. I
once heard a man from Connecticut say that the land was so
poor as a general thing that they could not ensure the resurrec-
tion of the dead without fertilizer. (Laughter.)

Mr. Corbin (Connecticut) : Not having been in that condi-
tion I could not testify to the effect of feidilizer, but I know I
was born, in a town where it was necessary to sharpen the
sheep’s noses so as to let them feed between the rocks. (Laugh-
ter.) That very town has cut off probalily more white pine
than any town of its size in the State of Connecticut. They
are commencing there to plant white pine forests, mostly by
outside capital; but still the people in that small town of
Enion feel that they ought to replant the land that has been
cut off. I think our period of exemption is long enough, but
what I would like to do is to show to these men that on a busi-
ness basis they can afford to plant this land to forest, and that
their childien, at least, will reap a fair return from their invest-
ment. I cannot quite feel that taxation at full value for a
period of 26 plus 14 or 15 years would make them see that.

As to the value of farm land in Connecticut the lowest aver-
age assessed valuation for any county returned by the assessors
to the tax commissioner last year was $9 per acre on a basis
of not over 70 per cent of a fair value. On the other hand,

the best tobacco land is held by the owners above $500 per
acre.

Dr. Fernow: I have listened with great attention to all the
discussion. This is the subject that I have thought of for
probably thirty years and come to conclusions myself. Ex-
emption from taxation would imply that there is a certain
amount of cash to be had. Plantation means an expenditure
of money. Now, what you want to do is to balance these two,
expenditure and income, and when you find that you have to
spend from six to eight or ten times as much as the exemption
sum which the release of the taxes would give, you can under-
stand why there is no response to those tax release laws which

DISCUSSION AND CRITICISM

Rave been in existence over in the United States for fifty years.
Reforestation can be encouraged, provided there is encourage-
ment in one direction, that is, protection against fire. As it is
a long-wintled crop, from fifty to one hundred years, there is
not an incentive for a private individual to go into the business.

Dr. Chamberlain; Speaking incidentally about Connecticut,
I visited my ancestral home on a farm which is now in pos-
session of a cousin, and I saw the finest ten-acre orchard of
Baldwin apples, with trees averaging twent}"-five bushels to
the tree, one of the finest that I ever saw in the United States,
on a farm that my father used to own. I went out with my
cousin to what my father used to call his mountain lot, and my
cousin told me that in thirty years he could cut that over and
sell the timlier on the stump for S60 an acre. So much in re-
gard to the poor land of Connecticut, some of it. That is
in Sharon, Litchfield County, Connecticut. In regard to our
problem in Ohio as compared with the problem in Washington,
a hundred years ago when the settlers came to Ohio the trees
were a fearful nuisance. They had to be got rid of. Great
poplars that would sell for $50 apiece now had to be cut down
and windrowed and burned off in order that the settlers might
get bread and butter to eat. That was the problem then. In
Washington thev came in and took what was fertile as a coal
mine — the growth of five hundred years, and it was solid
value property just as much as a coal seam is, and ought to be
taxed.

In Ohio, land is worth $100 to $150 an acre, a good deal
of it, for growing corn and wheat and what not, and the problem
is so to adjust the question of taxation that it shall encourage
reforesting there. I don’t know how we are going to do it.
I have solved it in my own case partly by orcharding, which
has all the climatic effect of forestry so far as conservation of
moisture is concerned, — dense orcharding, — and two years
ago my orchard yielded $400 to an acre in apples, ten acres of
it, and thirteen acres more growing. That has the climatic
effect of forestry, and it has the financial effect of bringing ten
times its assessed value in a good apple year in the way of
apples; and I am inclined to think that our reforestation in
Ohio will largely be in the way of shade trees for beauty, and

STATE AND LOCAL TAXAITON

in the way of orchard trees of one kind or another which shall
serve climatic purposes. I know that the little town in which
I lived in, Hudson, Ohio, near Cleveland, was originally cut and
burned, and I can remember the horrible drought we used to
have, and I remember how the showers would fill the river
around in one way, and the Tinker’s Creek on the other, and
scarcely touch us on the high land every time because it was
so poor and so dry. Lately the village planted trees and the
college planted trees, and we planted orchards and shade trees,
and now the showers do not touch us, and go around.

But the question is. Is there any way we can induce foresting
by removing the taxation? The southeastern quarter or third
of Ohio was never glaciated, the glacial action did not pass over
there, the coal seams lie over there, the land is set up on edge
almost as much as it is in New Hampshire. I can say now
that if somebody big enough, if the owners of the coal mines,
for example, would take hold of it scientifically, and be exempt
from taxation of land, trees, the timber trees while it was grow-
ing, you could reforest that land that is too poor for almost
anything else. The question asked by one of the delegates
why a man who has a house worth S5000 should pay taxes and
the man who has timber worth S5000 should not pay taxes,
may be answered in this way: the house is a personal benefit
absolutely and nothing else; it is no public benefit whatsoever;
it is for that man himself; it is his property; he owns it and
uses it. So far as a forest is a cause of public benefit to
the State, to the watershed, to the farmers below, it looks as
if there was some justice in exempting it from taxation, and I
take it that land actively used in growing forests may be justly
exempted from taxation. You cannot do that in Ohio now
under the constitution, and so the assessors and the trustees
have to whip the devil around the stumps, as I may say, and
they have said, “Well, here are forty acres of timber, now it
is not bringing a cent to you, and we will value that for taxing
at about $5 an acre” — for ten years they do it, a decennial
appraisement — and so they virtually exempt it from taxation
as long as it is exclusively in timber. {Apjdause.)

Bulletin No. 4.

Third Vear.

(VOLl'MK TWO.)

ADDRESSES AND PROCEEDINGS.

Second International Conference.

State and Local Taxation.

Held at Toronto, Canada, October 6 8, 1908.

Price Two Dollars, postage prepaid, International
Tax Association, Columbus, Ohio.

Ready for distribution before January 1st.

Tiiis volume contains a discussion of
metliods ol taxation and assessment, by
olticials and educators from all parts of the
bnited States and C'anada. Problems of
atlministration and the economic effects of
lej^islation are considered trom different
view{)oints. Many of the sjieakers are
members ol State Tax Commissions or local
boards; others are economists viewing the
problems from a different angle, and still
others, speaking for those who pav the
taxes, present a side of the question that
often does not obtain a hearing.

The discussions following the addresses
and reported in the volume, add much
to its interest and practical value.

The addresses at this Conference cover
a^ number of subjects that were not fully
discussed at the first conference. The pre-

sent volume is a valual)le addition to tlie
volume ot Addresses and Id'oceedings of
the First Conference held at Columbus in
IhO?, The two volumes re|)resent the lat-
est conclusions of administrators in re.itard
to practical problems, and the best modern
economic thought. Officials, students, and
taxpa\’crs, will find these volumes exceed-
{•■’plv useful.

List of Papers contained in Volume Two.

Se-ientilic I)ivision Between State and Local
Taxation.

IVofessf)!- isaa-' A. I.oos, School of Political
Science, University of Iowa, Iowa Uitv. la.

I-'orest Taxation.

I' red R. I'nirthild, Professtjr of Ibc'ononiic s,
Vale Univerdty. Xew Haven, ('onn.

A. C . Shaw, i aw Dejiartnient, U. S. ihtrest
Ser\'iee, W'ashlnij^ton, I). ('.

i'orest Taxation and (h)nservation. as Praetieed
in C'anada.

Dr. H. IT Fernow, Sehool of Forestrv, Univer-
sity of Toronto.

Foo])eration between State and Loeal Authori-
ties in ti:e Assessment of Real Estate.

Matth(‘w B. Hammond. Pn.)lessorof lAatnomies.

( )hio State University, ('olumims. Ohio.

'I'axation of Intan^ic/les.

Professor ( haries j. Bullock. Department of
i'A'onomies, Harvard Uni\'ersitv, (-'ambricPi-e
Mass. * ’

i'armers and (hmeral Projiertv Tax.

I'. Derthi(‘k, Master State (A'am^e. Mantua.

( )hio.

'I'axatir)n of Moneys and ('redits.

J. H. Fasterdav. P\)rmer Member State Tax
Uommission. Tacoma, Washington.

( anadian Methods of Taxing ('orj)orations.

Professor jam(‘F .Mavor, Ihuversitx' of Toronto.

Inheritance Tax Laws.

Williani H. Corbin, State Tax ('(^mmissioncr
Hartford, (V>nn.

Taxation of Inheritances.

Professor Solomon S. Huebner. University of
Pennsylvania, Philadelphia. Pa.

Joseph H. Lnderwood. Professor of Lconomics,
Lnivcrsit) of Montana, Missciiula, ^bjntana.

i he Importance of Precision in Assessments.

Professor L. R. A. Seligman, ('olumbia Univer-
sity. Xew York C'ity.

< ity Real Ii^state Assessment.

Lawson J^urd\', President. Dej^artment (jf
Taxes and Assessment, C'itv of Xew York.

Publication f>f *Vssessment Lists.

James F. Boyle, Professor of IX'onomies and
Political Science, University of Xorth
Dakota, Grand Forks, X. D.

Business Assessments^ as a Substitute for Per-
sonal Propert}' Tax.

James ( . Forman, Assessment C'ommissioner,
Toronto.

Tax Systems of Xorthwest Uanada.

I heo. Hunt, ( itv Solicitor, Winninetr

Manitoba. ' ^

Taxation in Alberta.

John leiiic, lax ( ommissioner, bvdmonton
Alberta.

Taxation in British ('olumbia

John B. Ak'Killigan. Provincial Surveyor of
T^ixes, Victoria, B. ('.

Taxation of Life Insurance ('ompaniesin C'anada.

r. Bradshaw, Managing Director. Imperial
Life Assurance C'o., Toronto.

Taxation of Life Insurance.

Robert Lynn C'ox, General ('ounsel. Associa-
tion of iufe Insurance Presidenls, Xew York
C ity.

Taxation of .Mineral Resources in C'anada.

I rolessoi ()scar I). Skelton, (lueen \s Univer-
sity, Kingston. Ont.

Assessment of Oil, Gas and Coal Land.

i. T. Townsend, CJhief ( lerk, Dejjartment of
Taxation of the State of West Yindnia,

C harleston, W. Va. ^

Taxation Minerals.

Frank L. Mc\ ey, ('hairman. State Tax ('oin~
mission. St. Paul. Minn.

Taxation of Mines in Utah and Nevada.

j. J. Thomas, Secretary, State Board of Ihiual-
izatif>n. Salt Lake ('ity, Utah.

Urrowth of State and Local Expenditures.

Professor W. 1'. Gephart. Ohio State Uni\cr-
sity. ('olumous, Ohio.

Work of the Kansas Tax ('ommission.

Samuel T. Howe. S. (\ ('rummer and W. S.
G-lass, vState Tax ('ommission. Topeka. Kas.

The Work and Ih'oblems of State Tax ('ommis-
sions.

IT E. \Voodl)urv. ('hairman, State Ikjard of
Tax ('ommissioners. Albany, X. V.

Taxation of Public Ser\'ice ('orporations.

Milo R. Maltliie. MemVier, Pul)lic vService ('om-
mission. ('it\- of Xew York.

Discussion.

Harrison AVilliams. General Land and Tax
Agent. Brie Railroad ('omjiany. Xew "N'ork
('ity.

Frank P. ('randon. Tax C'ommissioner, ('hicago
and Xorthvestern Railway Co., Chicago.

Problems of Local Administration.

Oscar Leser, Judge Appeal Tax ('ourt. Balti-
more. Md.

Doul-)le and ^Multiple Taxation.

Theodore Sutro, ('hairman. Committee on
Taxation. American Bar Association, Xew
York ('ity.

ffistorv of ('onstitutional Provisions Relating to
Taxation.

Robert A. ('ampbell. University of Wisconsin.

INTERNATIONAL TAX ASSOCIATION

The objects of the Association art :

“ To formulate and announce, through the deliberately expressed
opinion of an annual conference, the best-informed economic thought
and ripest administrative experience available for tlie correct guidance
3l public opinion, legislative and administrative action on all questions
pertaining to state and local taxation, and to interstate and international
comity in taxation.”

The Conference is conqxised of delegates appointed by governors of
states, premiers of provinces, universities and colleges,

OFFICERS 1908-1909

President, Allen Ripley Foote, Commissioner, Ohio State Board of
Commerce, Columbus, Ohio.

Vice-President, United States. Lawson Purdy, President, Department of
Taxes and Assessments, City of New York.

Vice-President, Dominion of Canada, Arthur J. Mathkson, Provincial
Treasurer, Province of Ontario, Toronto, Ontario.

Corresponding Secretary, United States, A. C. Pleydell, Secretary New
York Tax Reform Association, 56 Pine Street, Xew York.

Corresponding Secretary, Dominion of Canada. G. R. Geary, K.C. Trad-
ers Bank Building, Toronto, Ontario.

Treasurer. Foster Copeland, President City National Bank, Columbus,

Ohio,

Secretar3q Mary C. Snyder, Board of Trade Building, Columbus, Ohio.

Executive Committee: The Officers of the Association and
Professor Charles J. Bullock, Harvard University, Cam-
bridge, Massachusetts.

Ernest C. Kontz, Attorney-at-law, Atlanta, Georgia.

F. ;M. Lee, President of Railroad Commission, Jackson, Mississippi.

N. S. Gilson, Chairman, Wisconsin State Tax Commission,

Madison, Wisconsin.

J. J. Thomas, Secretary State Board of Equalization, Salt Lake
City, Utah.

John B. McKilligan, Surveyor of Taxes and Inspector of Revenue,

Victoria, B.C.

The work of the Association is carried on by means of membership
fee and contributions.

All persons interested in the stutly and improvement of tax systems
and assessment methods are invite<l to join the Association, For terms
of membership, and list of publications, address the Secretary, Board of ^ \

Trade Building, Columbus, Ohio.

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