AN ECONOMIC ANALYSIS OF THE FOREST TAXATION LAW IN MASSACHUSETTS

• Main Author: KRONRAD, GARY DOUGLAS
• Language: ENG
• Published: ScholarWorks@UMass Amherst 1982
• Subjects: Forestry
• Online Access: https://scholarworks.umass.edu/dissertations/AAI8219820

Ad valorem taxation is usually considered to inhibit forest management. In order to reduce the problems caused by ad valorem taxation, Massachusetts has enacted a modified assessment-yield tax law. Chapter 61 provides that owners of ten or more contiguous acres of forest land, who are willing to manage their land under a planned program of forest management aimed at improving the quantity and quality of a continuous forest crop, may qualify to have their forest land assessed at not more than $10 per acre. In return for this tax reduction the landowner must pay to his local town a tax of 8 percent of the value of the stumpage for any products harvested. The main thrust of this study was to determine if Chapter 61 is an efficient and effective program for increasing the level of forest management and output on privately owned forest lands. This was accomplished by performing five analyses. In the first analysis, four benefit-cost ratios were calculated to evaluate the economic efficiency and effectiveness of the Chapter 61 program. Cost price analysis was used the determine the cost of producing the marginal physical timber product under the rules and regulations of Chapter 61. Cost minimization analysis was employed to determine the amount of money saved by the average landowner by classifying his property under Chapter 61. This analysis gives an indication of the possible "excess" subsidy given to a landowner. The fourth analysis performed is the calculation of the value of forest land classified under Chapter 61. This calculation is useful for formulating forest taxation policies and especially relevant if the site productivity approach to forest land taxation is utilized. The fifth analysis performed evaluated the impact of Chapter 61 on town financing for a sample of towns. Results of this study indicate that Chapter 61 is a viable alternative to ad valorem taxation but could be improved.