The realness and directness of this problem in the Pacific Northwest is seldom realized. Our deforested areas are great and growing, but of even more peculiar significance is our unparalleled opportunity for making them quickly profitable to the community. Forest growth is more rapid and certain than elsewhere. A heavy crop may be had again in from 40 to 60 years. It will hardly be of the quality of that now being cut, but considering the shortage then to prevail should bring fully as much wealth into the state from its manufacture, the majority to be circulated as payment for supplies and labor. Since, therefore, our denuded land should in 60 years or less bring in again as much as it has already, its idleness costs us each year a sixtieth or more of that immense sum, amounting to a great many millions of dollars annually. To this loss is added the loss of tax revenue which the new crop would yield, with countless indirect injuries.
THE OWNER'S COMPULSORY ATTITUDE
For this situation our system of taxation is chiefly responsible. The owner may or may not hold the land for a time under the present system, in the hope of selling it or of tax reform, but he will seldom if ever take any steps to insure reforesting, because to do so is too likely to be at an actual loss. Whether he has made money on the original crop has no bearing; nor has his being rich or poor, resident or alien. His cut-over land presents a distinct problem to him.
In the first place, its sale value represents an investment. He may sell and reinvest the money in any business which looks inviting—perhaps in standing timber. Presumably he can get ordinary business returns, 6 per cent or more, and continue to reinvest these returns. Therefore if he leaves this money in forest land for 50 years without return, for every dollar so tied up he must get $18.42 at the end of that period if he is to make 6 per cent on the investment. And this applies not only to the present value of the land, but also to any added expense he incurs in modifying his cutting methods, or in replanting, in order to insure reforestation. If both together amount to $5 an acre, he must net $92.10 at the end of his 50 years in order to make 6 per cent.
So far no complaint can be made. But if the land is to produce a second crop it cannot be left to take care of itself, as it might were it being held for speculative purposes only. It must be protected from fire and trespass. And since the interest and principal invested will amount to so much for so long a period and be totally lost in case of destruction, the protection must be adequate, practically amounting to insurance. The annual cost will vary greatly according to locality, class of timber, and the enforcement of fire laws, but will be from 1 cent at the minimum to 15 cents at the maximum in bad seasons. If all cost of protection and administration is placed at only 5 cents annually, for the sake of illustration, this represents another investment constantly increasing and compounding, which, at the end of 50 years at 6 per cent, will amount to $14.51 an acre. Consequently, adding that to his original investment which will have become $92.10, he must net $106.61 to make his 6 per cent.
HOW TAXES ENTER THE PROBLEM
Let us now consider the influence of taxation. We have assumed the land to be valuable for forest growing only, and in calling his investment $5 an acre included some cost of insuring reforestation. Place this at $2 and leave a land value of $3, to be fully taxed at 30 mills for both state and county purposes, which is perhaps a fair average. This represents the third form of his investment, or 9 cents an acre invested annually and left unavailable for 50 years, and will amount at the end of that time, at 6 per cent, to $26.13. He has now to clear $132.74 an acre, besides being always in danger of total or partial loss from fire, and during all this time has to have the money, made in some other way, to meet all the annual payments. But no injustice appears, for he has been taxed on an equal basis with other producers. If his acre yields 20,000 feet (the maximum to expect), worth $7 a thousand, he has made his 6 per cent, the community has gained a resource, and everyone is satisfied. His land has been taxed fairly and as he now has a crop to sell he can afford to pay a tax on it also. If it is taxed at 3 per cent, or $4.20 an acre, county and state will altogether have received from him the same tax revenue they collect from other forms of property and industry of like value and profit, and received also the other benefits of forest production and of his expenditure of wages for protection.
But this is just what cannot legally be done under our present tax system. By failure to recognize that the growth produced is a crop, distinct from the land, grown at the owner's effort and expense, and returning no revenue until ripe, the law now compels the repeated annual taxation of the owner's effort to an extent very likely to amount to confiscation. It has been seen that even under the fair system outlined in the preceding paragraph, forest growing is not more than ordinarily inviting and involves considerable risk and capital. Yet it assumed only a fair annual tax on the land. Under our present system, logically carried out, here is what would happen:
The first year the tax would be the same. The second year a fiftieth of the total fifty-year crop, which we have assumed worth about $140, or $2.80, would be added to the land; therefore not $3, but $5.80, will bear the 30-mill levy, and not 9 cents, but 17 cents, actual tax will be paid. The third year the tax will be 25 cents an acre; at the twenty-fifth year it will be over $2 an acre. We have seen that even a 9-cent tax amounted to an investment of over $26 an acre in order to produce the crop. The continual increase of this according to growth would make the investment run into many hundreds of dollars if the same interest is calculated, and in any case would make reforestation financially impossible.
In actual practice, the increased valuation would probably not be made by the assessor in the manner just described. Instead of determining the rate of growth scientifically and applying it annually, he now makes an ocular reappraisement at considerable intervals. In most cases there is no increased value, for the land does not reforest but is continually reburned. Where it accidentally does reforest, he makes a rough calculation of the value of the second growth, based upon no particular system and seldom alike in different counties. But the principle remains the same and the result differs only in degree. With the most lenient valuation at 10 or 15-year intervals, the addition of material which makes growing forests so different from our stationary mature forests of today is bound, under our present system, to have confiscatory effect. The land owner, so far from being encouraged to establish and protect a new forest, is actually penalized, for he must assume that its expectation value will be taxed annually, perhaps on an exorbitant basis, as soon as it becomes apparent.