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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
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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