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1 Travis Greaves, States Use Gentle Hand in Taxing Timberland 1 (2009)

handle is hein.taxfoundation/ffbgexz0001 and id is 1 raw text is: UFISCAL March 2009 FACT No. 164 States Use Gentle Hand in Taxing Timberland By Travis Greaves In the realm of real property taxation, the best-known tax is on residential property. Every U.S. homeowner knows that the local government will collect a small percentage of the property's fair market value each year, ranging from much less than one percent up to more than three percent.' Local governments levy a similar, often higher tax on stores, factories, warehouses and other common types of commercial property.2 State-level governments normally leave these types of real estate untaxed, focusing their property taxes mostly on cars and boats. As a result, local governments collect 95 percent of total property tax revenue. However, there are exceptions to state governments' custom of leaving real estate taxation to local governments. Here we briefly survey the ways that state governments are taxing forest and timberland. The Forgiving Nature of Current Use Value In taxing timberland, states use a variety of assessment techniques limiting the ability of local governments to collect taxes on timberland: ad valorem or current use tax, flat property tax, yield tax and/or severance tax. In most cases, the systems favor maintaining current timberland. All but five states use an ad valorem tax. This is the so-called current use tax, whereby the tax due depends on the value of the land as it's currently being used. This current use valuation is much lower than fair market value because many landowners do not put their land to its most profitable use. If owners of forested land had to pay a percentage of the land's fair market value, their payments would be much higher because potential buyers considering other uses for the land would drive up the fair market value. This fair market value system would increase pressure on land owners to make profitable use of their land or sell it to someone who would. 1 See Property Tax on Owner-Occupied Housing, by County, Ranked by Property Taxes as a Percentage of Home Value, 2005-2007 Average, Tax Foundation Tax Data (Dec. 12, 2008), at http://www.taxfoundation.org/taxdata/show/24051 .html. 2 Real property refers to real estate. Some state governments also tax property, but usually that is limited to personal property, mostly cars and boats.

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