The Effect of Nontimber Taxes on the Harvest Timing—The Case of Private Nonindustrial Forest Owners: A Note

Abstract

Abstract The paper focuses on how lump sum, exogenous labor income and capital income taxes influence timber supply in a two-period model, when future timber price is uncertain. First, the usual comparative static results are derived. Second, the relative effects of taxes on the timber supply are studied, on the assumption that government keeps the tax revenue constant. It will be established that the entire taxation system, i.e., even nontimber taxes, affect timber supply. Moreover, the supply effects of government tax policy depend crucially on capital market conditions. Under perfect capital markets a switch from lump sum tax towards labor income tax has no effect on supply, and on the other hand, a tax switch toward capital income tax (increased interest payment deductability) decreases timber supply. Under credit rationing the sign of the former switch depends on the relative magnitudes of labor income during the first and second period, and the latter increases timber supply. For. Sci. 37(1):356-363.