• logging roads (too many, too long, on land too steep);
• clearcutting; and
• slow replanting.   

100 years ago, American Georgists made a big point that city land outvalues rural land many times over. One implication is that taxing city land is taxing the rich, and we can ignore farmland. Some land-taxers counsel that farmers are easily misled to oppose us, so leave them alone and convert the cities. But rich city folks also own choice rural lands.

• The Hearst palace at San Simeon sits amid 82,000 manorial acres, including miles of prime shoreline, "improved" with just one home per 82,000 acres. This home, jammed with imported treasures, had become a white elephant even before Citizen Kane uttered his final "Rosebud." The heirs were glad to fob it off onto the taxpayers of California, deducting its alleged value from their taxable incomes, while they kept the 82,000 acres.
• Craig McCaw, who made his billions by amassing spectrum licenses, turned some of the pile into a spread of many thousands of acres stretching north from Big Sur -- land he never got around to using.
• The O'Neill families and Donald Bren of Orange County,
• the Newhall family of Ventura County,
• the Chandler family that owns the Tejon and Boswell empires that spread over several counties,
• Ted Turner who owns over a million acres around the U.S.;
• the Koch brothers of Kansas with all their oil wells,
• the Kleberg tribe with their million-acre King Ranch in Texas;
• the Southern Pacific Railroad (now Catellus Co.),
• Standard Oil:

The privilege of use-value assessment stretches even beyond farmlands, vast as they are. Timberland in most states gets the same preferred treatment, only better. About 1/3 of the privately owned land in the U.S. is in timber. In California, owners (mostly huge corporations) may put the land into the "TPZ" class. The standing timber is then exempt, and taxed only at harvest, at 2.9%, much too low a rate to make up for a 60-year lifetime of exemption. County assessors have to value the land separately on its putative value for growing timber, following a State-legislated formula that is tailored drastically to understate even that low value (California Revenue and Tax Code, Section 434.5). Much of that land, though, has alternative uses, e.g. for retirement and vacation homes and resorts, the outliers and pioneers of urban sprawl. There are also mineral values, hunting, fishing, rifle ranges, grazing, campsites, tourism, rights of way, lumber camps, loading sites, water sources, lakes, log storage, landings - there are many things to do with 1/3 of a nation's land. Those uses are all declared "compatible" with timber, hence land values derived therefrom are tax-exempt.  Read the whole article

Charles B. Fillebrown: A Catechism of Natural Taxation, from Principles of Natural Taxation (1917)

Q66. What has the single tax to say about the taxation of forest lands?
A. Perhaps the majority opinion would be to tax annually all forests old or new on what would be the value of the land if denuded of all growth -- a stumpage tax to be collected upon old growth timber when cut, but not upon new growth such as may be reasonably classed as a cultivated crop. ... read the whole article

Mason Gaffney: Property Tax: Biases and Reforms

• Reassess Land Frequently
• Use the Building-Residual Method of Allocating Value
• Federal Income Taxes

• A. Rich and Poor
• B. Timber and Timberland
• The Role of Timber and Timberland
• Two More Areas Deserving Attention
• Offshore Oil
• Tax All Natural Resources Uniformly and Comprehensively

Timber and Timberland

Standing timber is generally now exempt from property taxes, by law or custom. Land remains on the property tax rolls. This sounds like a Georgist idea; advocate Ellis Williams, a forest economist, has made the point. It is, however, just partial and discriminatory Georgism. The present system works as though you exempted half the buildings in a city from a tax and raised the rate on the others. Timber is exempt, but as soon as it is cut, milled, and hammered into buildings, it goes on the property tax rolls. The bias is apparent between capital in different forms.

Standing timber still yields some revenue when it is cut. The idea has been to substitute a "yield-tax" for the property tax. In practice, though, yield tax rates are much too low to be revenue-neutral. In California, for example, the yield tax rate is 2.9 percent. It is levied just once during the tree's life cycle of 60-100 years, at the end. Two and nine-tenths percent levied just once at the end of each 60 years, is obviously less than one percent levied every year, starting from year one. Values are low in the sapling years, but well above zero, and in the last few years before harvest, the stumpage is worth nearly as much as its harvest value. I have calculated that a yield tax of 25 percent or so (varying with the interest rate and the tree-life) is needed to have the same present value as a one percent property tax.

Here is the revenue result in one major California timber county, Mendocino. Its major property value is timber, but the County government and its subdivisions hardly get dried beans from the yield tax on it: $3.9 million in 1993, compared to $45 million from all property. This is not because they are cutting timber slowly; actually they are depleting the inventory. Neither is it because other values are high. This County has no large cities. Most of its people live outside the cities, and its annual timber harvest is twice as high as the sum of all its other "agricultural" gross output (including fishing). The net cash flow from timber harvests is much more than twice as high as the net cash flow from other property, because stumpage value is added mainly by property (land and trees), while other farm products like grapes, fruits, and milk are more labor-using.

How about land under the timber? It is separately valued, and kept on the property tax rolls. However, it yields revenue of only $1.2 million: one-third of what the yield tax renders.

Why so little? They could raise the valuation of timber land to compensate for exempting the trees. In addition, "timberland" in some areas is sold for vacation homes and resorts. Assessors once began using those sales to justify higher valuations. They also observed smaller timberland owners paying higher unit prices than giant corporate owners, and up-valued parts of their vast spreads accordingly.

Timber owners had other ideas, however. Major owners like SP (520,000 acres of timber in California) took alarm and went to Sacramento for relief. They got their lands put in a "Timber Preserve Zone" (TPZ) wherein land is assessed only on its putative value for raising timber, regardless of market value, regardless of alternative uses, and regardless of nontimber income from land growing timber. These "compatible" (untaxed) uses include grazing, resorts, vacation homes, campsites, fishing, hunting, watershed protection, tourism, rifle ranges, rights-of-way, mining, log storage, landings, roads, logging camps, etc. There is also hemp for the drug trade: possibly the state's most valuable farm crop, but unrecorded.

TPZ is hardly known outside the timber counties, but it covers vastly more than the better-known "Williamson Act" which provides for preferential low assessment of farmland. In Mendocino County, TPZ land of medium grade ("Site III") is now tax assessed at $136/acre. This is about ten percent of its value for growing timber (disregarding compatible uses), and a lesser fraction of its value for higher-valued "incompatible" uses like retirement homes that require formal "conversion" (obtainable on demand) out of TPZ. This is how they keep the tax payments on TPZ land down to only $1.2 million.

Redwood is a faster-growing species than most western timber (although much slower than Yellow Pine in the southeastern states). An acre of good (Site II) Mendocino land will yield a crop of 40,000 bf after 60 years of growth, worth about $20,000 on the stump at the 1995 prices. Discounting that to the present, using a real interest rate of five percent, means dividing it by about 16. Add ten percent for the present value of all harvests after 60 years, and you have very roughly $1,400/acre for the land value based purely on timber culture, considering no other values. Yet under TPZ its assessed tax value is $158, about 11 percent of its true value just for timber culture. This is accomplished by legislating the actual acre values (California Revenue and Tax Code, Section 434.5). The legislated formula mandates that "income-based" assessments be based on past prices, projected into the far future with no adjustments for inflation, but discounted at a high interest rate. It is clear for whose benefit this law was framed. ...

Timberland owners around the country have sold this bill of goods to legislators. In many states, less than half the private land is fully taxable, because of such laws. These are not all western or southern states, either, as one might surmise. In NH, for example, only 45 percent of the private land (and none of the Federal land) is fully taxable. The rest is sheltered by the State's "Current Use" tax law, their version of our TPZ law.

Advocates for these laws argue that land taxes, accumulating with interest over long growth periods, would eat up all the profit from growing timber. Let us see. Taxes of $1.56 per acre per year, accumulating over 60 years at a real interest rate of five percent, come to $552 per acre in constant 1995 dollars. At that time the timber stumpage will be worth about $20,000 at 1995 prices, or 36 times the accumulated future value of the land taxes. (In addition, the investment will have served to shield the owners from the eroding effects of inflation, a benefit assumed away by using constant dollars. On top of that, it is a good bet the real value of timber will have risen after 60 years of population growth.)

Thus, land taxes would have to be 36 times what they are now to consume the whole value of timber harvests. The fact is, present taxes are a negligible token. Timberland is effectively sheltered from the full weight (light as it is) of the one percent property tax imposed on ordinary land. It pays, as we have seen, only about $1.2 million a year in Mendocino County.

Timberland owners around the country have sold this bill of goods to legislators. In many states, less than half the private land is fully taxable, because of such laws. These are not all western or southern states, either, as one might surmise. In NH, for example, only 45 percent of the private land (and none of the Federal land) is fully taxable. The rest is sheltered by the State's "Current Use" tax law, their version of our TPZ law.

Owing to the success of timber people in spreading their gospel, almost all of their land is underassessed. Almost all state yield taxes, imposed in lieu of property taxes on standing timber, are too low to be revenue-neutral. Add to that, Congress since 1943 has made timber a "capital asset" for federal (and therefore state) income tax. Many costs of managing and carrying this capital asset are expensible - certainly interest and property taxes are. The net result is that timberland contributes very little to public revenues at any level.

Residents of timber counties are typically scattered and poorly organized. Timber companies are huge, rich, few and tightly organized. In Mendocino County, Georgia Pacific and Louisiana Pacific, absentee owners, together own the best 500,000 acres - 58 percent of the County's timberland - and Georgia-Pacific owns Louisiana-Pacific. They control state forestry schools, paying professors as consultants. They support research in forest economics at think tanks like Resources for the Future in Washington, which has never criticized their tax preferences but trained its big guns on public agencies, the Forest Service and the Bureau of Land Management. "The industry" controls tax laws in 50 states, and sloughs tax burdens onto others. It will continue to do so until other taxpayers in the timber counties wake up and organize to control state timber tax laws.   ....

Priority #4. What Tax to Fight First?

We must set priorities on taxes to lower and eliminate. The Georgist [geoist] objective is dual: to raise taxes on land, and to lower taxes on other bases. Many Georgists have the posture and mindset of reforming just "the property tax," in a vacuum, but this was never George's main point. There are other new or augmented taxes more damaging and noxious than the property tax falling on reproducible wealth:

• state taxes on retail sales;
• payroll taxes;
• income taxes falling on wages and salaries;
• excise taxes; etc.

The result is also regressive, because personal property in most industries is more concentrated in ownership than real capital. In farming, for example, personal property includes cattle, stored grain, and farm machinery, but the owner's dwelling is real capital.

Other Georgists have diverted their efforts into wiping out the property tax on standing timber, replacing it with a nominal yield tax. Again, the result is partial and discriminatory, biasing investors to allocate more capital in the form of timber, and correspondingly less in other forms. As noted earlier, the present system works as though half the buildings in a city are exempted from a tax and the rate on the others raised.

Timber-exemption is highly regressive because the ownership of timber is much more concentrated than the ownership of homes of loggers and mill-workers and retirees in the timber counties. It would not be so bad if the land taxes on timber-growing sites were raised enough to compensate for exempting the growing stock. However, as we have shown, these site taxes are also held down to token levels. The net result is to turn timber and timberland owners into a huge public welfare case supported by a sophisticated brainwashing machinery paid by the discretionary income and wealth of the industry. Read the whole article

Mason Gaffney:  Who Owns Southern California?

Alanna Hartzok: Who Would Jesus Tax? The Saga of Susan Pace Hamill's Alabama Tax Crusade

A University of Alabama School of Law Professor has asked God's forgiveness for the years she lived in the sin of ignorance about tax injustice. Susan Pace Hamill, a tax expert, business consultant, and dedicated United Methodist church goer, thought there was a misprint when she first read that personal incomes as low as $4,600 for a family of four were being taxed by the state, while timber owners holding 71% of the land of Alabama were paying less than $1 per acre in property taxes. Two hours later she found out there had been no mistake and that Alabama has the most regressive tax code in the country. Her righteous rage spawned a tax crusade that has reverberated onto the national scene.

"As somebody who knows a lot about taxes, I could not have imagined a design of a tax structure this bad," she said in a Tuscaloosa Newsstory last February. "The state's tax code is really horribly unjust and has no moral, ethical leg to stand on. Period."

Alabamians with incomes under $13,000 pay 10.9 percent of their incomes in state and local taxes while those who make over $229,000 pay just 4.1 percent. Commercial property owners pay more than 50 percent of property taxes, with homes approaching one-third. Alabama's sales taxes are among the highest in the nation, up to 10 percent in some areas, and do not exempt even the most basic necessities such as food. The state's 1901 constitution was written primarily by large landholders to secure their economic interests, consequently property taxes are extremely light on their holdings. ... read the whole article

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)

"Jobs vs. the environment" is the dismal trade-off offered by confused thinking. A Georgist economy is resource-saving as well as job-making. It saves resources by focusing human activities intensively on the lands that are used, leaving or releasing marginal lands for wildlife, recreation, wetlands, watershed protection, etc.

There was once a tendency for environmentalists to oppose human use of land wherever and whenever they could. Now, most of them are looking at the whole human system. The Sierra Club is supporting urban infilling, seeing that demands that are not met here are bound to pop up there. John Baden, a Pacific Northwest forest economist, sums it up in a few words: timber should be grown on lands that are flat, warm, wet, and near markets. Georgist tax pressure applied to those "Site I" lands will promote exactly that, leaving the steep, arid slopes for scenery, watershed, and recreation.... read the whole article

Mason Gaffney: Full Employment, Growth And Progress On A Small Planet: Relieving Poverty While Healing The Earth

In forestry, the places to grow commercial timber are lands that are “flat, wet, and warm,” as John Baden summarizes it. (He might have added, “accessible.”) Failure to restock such lands economically pushes demand onto lands that are steep, dry and cold, creating the “forestry sprawl” from which we suffer. ... read the whole article

Mason Gaffney: Sounding the Revenue Potential of Land: Fifteen Lost Elements

Mason Gaffney: Two-rate in Reverse

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

Limits of Public Ownership

Because of historical circumstances, America has a long tradition of public land ownership. When Europeans first arrived, North America was held in common by an assortment of tribes. As these tribes were dispossessed, the federal government acquired their territories. Some of the federal holdings were given to states as they entered the union. Though most of what the federal and state governments owned was then sold cheaply, much was retained. Today, nearly a third of the land in the United States is government-owned.

To say that land — or any asset — is “government-owned,” however, isn’t to say it’s managed on behalf of future generations, nonhuman species, or ordinary citizens. Consider what the federal and state governments have done with the lands they own.

Outside of Alaska, about 5 percent of government-owned lands have been designated as wilderness. In such areas, humans may enter on foot but not use motorized vehicles. Mining, logging, and hunting are also prohibited. On the other 95 percent of government-owned land, private and commercial use is regulated by various agencies. National forests are managed by the U.S. Forest Service, grazing and mineral lands by the Bureau of Land Management, hunting and fishing by the U.S. Fish and Wildlife Service.

As a general rule, politics — not fiduciary duty — determines what uses are permitted and what prices are charged. A classic example is the Mining Act of 1872, under which private companies can stake claims to mineral-bearing lands for $5 an acre, and pay no royalties on the minerals they extract. Every attempt to reform this antiquated law has failed because of the mining companies’ political clout.

In the same vein, the U.S. Forest Service has for decades been selling trees to timber companies for below-market prices. On top of that, it spends billions of tax dollars building roads in virgin forests so timber firms can harvest the people’s trees. This is, of course, economically irrational and a huge subsidy to private corporations. It also addicts Americans to cheap forest products and destructive logging methods. These practices occur because the Forest Service is not a trust committed to ecosystem preservation, but a politically influenced agency dedicated to “multiple use” of government-owned forests.

There are exceptions to this dismal pattern. One involves trust lands given by the federal government to states. Such gifts began with the Land Ordinance of 1785, which reserved one square mile per township for the support of public schools. Later, the Morrill Land Grant College Act of 1862 gave more land to states to support colleges of agriculture and mechanics. And in 1954, Congress gave Texas title to oil-rich coastal lands, providing that all revenue from them be placed in an endowment, or permanent fund, that generates income for public schools forever.

Today, twenty-two states hold about 155 million acres in trust for public schools and colleges — which is to say, for future generations. Like the federal government, the state trusts lease much of their land for oil drilling, timber cutting, and cattle grazing. The trusts’ duty is to preserve not the land itself but the income streams it generates. This creates beneficiaries (educators, students, parents) who monitor the land managers closely. One result, according to University of California professor Sally Fairfax, is that state trust lands are better managed than federally owned lands. Whereas the U.S. Forest Service “has been hiding the ball on cash flows and returns to investments for most of this century . . . the state trust land managers know how to keep books and make them public.” Further, even though the state trusts aren’t bound to protect ecosystems per se, they tend to do so because they have a long-term calculus.

An interesting variant of the typical state land trust is the Alaska Permanent Fund, created in 1976 to absorb some of the windfall from leasing state land to oil companies. The aim was to create an endowment that would benefit Alaskans even after the oil is gone. To this end, the Permanent Fund invests in stocks, bonds, and similar assets, and off the earnings pays yearly dividends to every resident. Originally, the dividends were to be allocated in proportion to the recipients’ length of residence in Alaska, with old-timers getting more than newcomers. But the U.S. Supreme Court ruled that, because of the Equal Protection clause of the Fourteenth Amendment, Alaska couldn’t discriminate against newcomers that way. The dividend formula was then changed to one person, one share. ... read the whole chapter