FOREST-TAXATION Reforms Dependent on Correction of General Tax Defects

The burden of taxation upon any group or any person is the resultant of two factors: (1) The total amount that must be raised by taxation, and (2) the methods by which this amount is distributed among the taxpayers. The amount is fixed when the appropriate legislative body, State, county, or town, determines the functions to be performed by the government and the cost thereof. The second is a matter of equitable distribution, involving methods of taxation and the effectiveness of tax administration.

Taxation of American forests is principally in the hands of the States and their local subdivisions and is imposed chiefly through the property tax. If the taxes borne by forest property are burdensome, the cause must be either that the total tax levies are heavy or that forest property is discriminated against in the structure or administration of the taxing machinery. Giving full recognition to such unfair discrimination against forest property as does exist, the investigations of the forest taxation inquiry clearly indicate that the predominant cause of heavy timber taxation today is the heavy cost of State and local government.

The cause of next importance is faulty administration of the property tax. The theory of the property tax is beautifully simple—distribution of the cost of government in proportion to the value of taxable property possessed by each contributor. In its operation, however, the American property tax has developed defects so serious as to call down the reproaches of virtually all tax students, at home and abroad.  Assessment is the heart of the property tax, and it is chiefly the imperfect functioning of assessment that has made the property tax a farce in so many places. In almost any rural district, can be found parcels of property assessed at 2 or 3 times their true value, while others get off at a quarter or less—and some escape the assessor’s notice entirely. Obviously, to the extent that assessment fails, the property tax becomes a travesty of justice, and there is evidence that forest property is frequently thus discriminated against.

Remedial Measures Available

The heavy cost of State and local government and the imperfect, administration of the property tax thus furnish the principal causes of the unduly burdensome taxation under which forest property in many parts of the United States is suffering. For the first cause the remedy is obvious—reduction of the cost of State and local government, particularly in the forest regions.  For the second, reform of assessment, as well as improvement in other phases of property-tax administration, is indicated. Limitation of space does not permit detailed discussion of these remedies. Appropriate measures are available, however, whose adoption promises good results.

   Reforms along these lines are not confined to owners of forest property. If those who are seeking less burdensome forest taxation look merely for some special device to shift the burden, the natural opposition of all other groups is encountered it is forest-tax reform against the field. But all taxpayers are sufferers from the basic causes which make forest taxes heavy. And, when all taxpayers see this and work for the clearly indicated remedies, results will come.

Successful attack upon the forest-tax problem along these lines would go a long way toward its solution. But not quite the whole way.  There is a third ground of complaint, arising from the inherent nature of the property tax, which affects forestry in particular. This is a technical matter, and it will be sufficient here to state the conclusion that the property tax, by discriminating against any use of land which involves deferment of income, tends to increase the area of land that cannot be used economically, under private ownership, for growing forests.

This reference to deferment of income is not intended to obscure the importance of progress toward organizing forests so as to produce a regular annual income. When such condition has been attained, forestry suffers no peculiar disability under the property tax, and there is no special forest-tax problem. But the annual-sustained-yield forests would still suffer, with all other classes of taxable property, the adverse effects of taxation resulting from heavy costs of government and faulty administration.

Proposed Methods of Forest-Tax Reform

Escape from the inherent discrimination of the property tax against the use of land for growing timber must be sought in tax measures relating especially to the forests. Past experience with such special forest-tax legislation has not developed a sound plan. Therefore the forests taxation inquiry, after a searching study, both theoretical and factual, has formulated and recommended three practicable methods of modifying the property tax. These plans are based, it is believed, on correct principles. They are fully described in a comprehensive report of this inquiry.

   It has been suggested that the solution of the forest-tax problem requires (1) reducing or at least limiting the cost of State and local government, (2) perfecting the assessment of the property tax, and 3) providing some modification of the property tax which will adjust it to the peculiar nature of the deferred-yield forest. Either of the first two reforms would accomplish its full effect whether the third were adopted or not. The third reform, on the contrary, while doubtless worth securing by itself, would be of limited usefulness, and might even fail entirely of beneficial results, if nothing were accomplished in the way of reducing governmental costs or enforcing the strict observance of sound assessment methods. It should always be remembered that no special forest-tax plan is to be regarded as the solution of the forest-tax problem. It is simply one—and probably the least important one—of the three parts which make up the whole program of forest-tax reform.

FRED ROGERS FAIRCHILD, Forest Service.