Timber Income Research Articles

An integrated assessment model of carbon sequestration benefits: A case study of Liping county, China

This research attempts to model the complexity of planting trees to increase China's CO 2 sequestration potential by using a GIS-based integrated assessment (IA) approach. We use the IA model to assess the impact of China's Grain for Green reforestation and afforestation program on farmer and state incomes as well as CO 2 sequestration in Liping County, Guizhou Province. The IA model consists of five sub-models for carbon sequestration, crop income, timber income, Grain for Green, and carbon credits. It also includes a complementary qualitative module for assessing program impacts by gender and ethnicity. Using four scenarios with various assumptions about types of trees planted, crop incomes by township, CO 2 credit prices, state subsidies, methods for estimating carbon sequestered, and harvesting of trees, we find great variation in the impact of the Grain for Green program on incomes and on carbon sequestered over a 48 year period at both the county and township levels.

Southern Pine Beetle Prevention in Florida: Assessing Landowner Awareness, Attitudes, and Actions

Abstract The fragmentation of nonindustrial private forests (NIPF) into progressively smaller parcels presents challenges to landscape-level management of forest pests such as the southern pine beetle (SPB). In a survey of northern Florida NIPF landowners, awareness of the SPB, forest management plan use, importance of timber income, and implementation of preventive management practices all decreased with decreasing ownership size. Small parcel size, expense, and lack of knowledge were frequently cited reasons for lack of forest management. Educational approaches that motivate forest management on small NIPF tracts are needed to promote landscape-level forest health. We discuss some broadly applicable landowner education strategies that may help address this challenge.

Tree Diversity, Landscape Diversity, and Economics of Maple-Birch Forests: Implications of Markovian Models

Markov decision process (MDP) models were effective in analyzing forest management policies. Even the simplest standard results gave useful insights into forest ecology, such as how landscape diversity is shaped by natural catastrophes, and how forests mature through successional phases. The methods were also useful to predict the effects of different management policies on ecological and economic criteria. Optimization augmented the usefulness of the approach, suggesting that income from Wisconsin's maple-birch forests could be increased without ruining their diversity of landscape, tree size, and tree species. It showed that maximizing species diversity, defined by the distribution of trees in shade-tolerance classes, would require some harvest. Instead, maximum tree size diversity occurred in unmanaged forests, but this gave a less diverse landscape and no income. The MDP method allowed for the design of compromise policies that would maximize income while keeping diversity above specified limits. The opportunity cost of increasing tree size diversity was found to be much higher than for species diversity. Comparing the maximum timber income owners could have got with what they actually cut suggested that the amenity value of forests was four times that of timber. Advantages of the methods reside in the ability to model complex ecosystem processes with simple probability matrices, and in the rich MDP theory and algorithms. Limitations include the difficulty of defining a space set large enough for accurate discretization, but small enough for practical application.

The Impact of Federal and State Income Taxes on Timber Income in the Northeast and Midwest Following the 1986 Tax Reform Act

Abstract The structure and provisions of state income taxes are detailed for timber owners in 19 states of the Northeast and Midwest. Using 1994 federal and state income tax rules, the tax liability for a hypothetical married couple with timber sale income was calculated for two federal income tax rate brackets (medium and high income levels) for states in the Northeast and Midwest that impose an income tax. At the medium income level, the state portion of the total income tax liability ranged from 12.7% in Pennsylvania to 25.6% in Delaware. At the high income level, the state portion ranged from 11.1% in Pennsylvania to 24.9% in Minnesota. For both income levels, New Hampshire had the lowest state portion of the total tax liability when considering their business profits tax (12% for the medium and 7% for the high income level). The provision most significantly affecting state income tax liability was the tax rate schedule. Installment sales provide an alternative tax planning strategy for those timber owners who qualify as investors rather than a business and who are in the lowest federal tax bracket. Several states also impose taxes other than an income tax when timber is harvested. For example, Minnesota and New Hampshire both impose a minimum 10% yield tax on the timber's stumpage value. These levies significantly affect the total tax liability on harvest income. North. J. Appl. For. 13(1):8-15.

Factors influencing the economic viability of three agroforestry systems in Eastern and Southern Africa

The economic viability of agroforestry systems depends on endogenous and exogenous biophysical and socio-economic factors. Understanding of such factors helps to delineate recommendation domain areas as well as to identify modifications in such factors in order to improve the system's viability. Each system has strengths and limitations in terms of its economic viability across the various land-use systems in Eastern and Southern Africa. In this paper, three agroforestry systems—taungya (or shamba), Faidherbia albida mixed intercropping, and hedgerow intercropping—are reviewed in terms of factors influencing their economic viability. The taungya system's economic viability was found to be dependent on conditions where access to land is scarce and where the returns to labour were low. To improve the returns to labour for the farmers participating in the system, a more prominent role of the agricultural activities is suggested, while the Forestry Department's net returns may be improved by changing their objective function from maximizing net timber income per unit area to optimizing total net timber income by using their scarce resources to cover larger areas, sacrificing some timber output per unit area. Alternatively, an increased public awareness of the environmental value of forest areas may generate additional resources to Forestry Departments, which may be used to increase income generating opportunities for the participating farmers. Apart from biophysical conditions required for the Faidherbia albida system, no specific socioeconomic conditions for this existing system were identified except that the tree's role may vary depending on the priorities of the farmer, i.e. food, fuelwood or fodder. A critical factor for the long-term sustainability and potential expansion of the system is the time required to reap the benefits from newly established trees. Therefore, research should be focused on selecting and breeding shorter period species. The hedgerow intercropping system is still in its infancy and mostly tried under research station conditions. To identify exogenous biophysical factors which may influence the biological response of the system, it is proposed that a more indepth synthesis of existing research is conducted to identify such factors. Particular attention should be paid to responses under low rainfall conditions and/or acidic soil conditions. Government policy on prices of inputs such as fertilizers, seed(lings) and food crops were identified as major exogenous socioeconomic factors affecting the economic viability of the system. Key endogenous factors which would affect its economic viability are the management capability of farmers, labour costs for establishing and maintaining the system, as well as the costs of seeds or seedlings. Because cost of establishment is influenced by the establishment method, choice of species and the hedgerow arrangement, it is proposed that more research is focused on the effect of these factors on cost as well as crop yields.

Impacts of the Tax Reform Act of 1986 on Noncorporate Timber Income in the South

Abstract The Tax Reform Act of 1986 (TRA'86) may reduce the timber-growing profitability of noncorporate landowners in the South. Effects vary by site index, length of rotation, market area, and tax provision. The long-run timber supply will be adversely affected by TRA'86. Short-run effects were not determined. Many producers will continue tree production with reduced profitability after TRA'86 because no better use for timber producing assets exists. Additional production and marketing efficiencies will be squeezed into tree production at the margin because of TRA'86. Some marginal producers, unable to become more efficient, may exit the industry. South. J. Appl. For. 15(3):113-117.

The Impact of Federal and State Income Taxes on Timber Income in the West Following the 1986 Tax Reform Act

Abstract Nineteen eighty-eight federal and state income tax liabilities for a hypothetical nonindustrial private forest landowner case were calculated for 13 western states. The state portion of the total income tax liability for the passive case (without timber sale revenue) ranged from 15% in Arizona, California, and Colorado to 25% in Hawaii for the medium income level. It ranged from 12% in Arizona and Colorado to 20% in Hawaii for the high income level. The state portion for the active case (with timber sale revenue) ranged from 12% in Arizona and Colorado to 21% in Hawaii, and from 10% in Arizona to 19% in Hawaii for the medium and high income levels, respectively. Federal income tax deductions, capital gain exclusions, and tax rates are the most important state provisions affecting state income tax liability. The installment sale method of reporting timber sale revenue was used as one alternative tax planning strategy. Timber sale revenue was spread over a 2-year period to reduce the amount of taxable income subject to higher marginal rates. In the Oregon hypothetical case, the landowners who elected to use the installment sale method would save $1,240 and $616 at the medium and high income levels, respectively. West. J. Appl. For. 6(1):15-20.

The Impact of Federal and State Income Taxes on Timber Income in the South Following the 1986 Tax Reform Act

Abstract The 1988 federal and state income tax liabilities for hypothetical forest landowners in two federal income tax brackets, each with and without timber sale revenue, were calculated for the 14 southern states. At the medium income level, the state portion of total income tax liability(without timber sale revenue) ranges from 9% in Louisiana to 20% in North Carolina. With timber sale revenue, it ranges from 7% in Louisiana to 17% in North Carolina. At the high income level, the state portion of total income taxes (without timber sale revenue) ranged from 7% in Louisianato 16% in North Carolina, and with timber sale revenue, from 6% in Louisiana to 15% in North Carolina. Capital gains exclusions, deductions for federal income taxes, tax rates and schedules, standard deductions, and personal exemptions are the most important provisions for reducing state incometax liability. The installment sale method of reporting income was used as one alternative tax planning strategy for spreading timber sale revenue over a 2-year period. The purpose was to smooth cash flows and reduce the amount of income subject to higher marginal tax rates. Georgia taxpayerselecting the installment sale method of reporting in a hypothetical case saved $1,203 and $585 in total income taxes for the medium and high income levels, respectively. South. J. Appl. For. 13(4):196-203.

Multiattribute Decision Theory and Forest Management: A Discussion and Application

Abstract The procedures required to implement Multiattribute Decision Theory (MDT) are presented. MDT is then applied to the management of a stand of timber owned by a nonindustrial private forest (NIPF) landowner who wanted to maximize both timber income and esthetic benefits. Harvesting/regeneration procedures of intermediate intensity maximize the well-being of a segment of NIPF landowners. For. Sci. 33(4):835-845.

Errata: Capital Gains Treatment of Timber Income: Incidence and Welfare Implications

Errata: Capital Gains Treatment of Timber Income: Incidence and Welfare Implications

Capital Gains Treatment of Timber Income: Incidence and Welfare Implications

One of the most controversial issues in the field of forest taxation involves the treatment of income from the sale of timber. Since 1943, most of this income has been treated by federal and (most) state' governments as capital gains and taxed at a much lower rate than income derived from other production activities. Such preferential capital gains treatment has been extended corporations and individuals alike, regardless of whether the timber sold was grown on privately or publicly held lands. Over the years, the preferential treatment of timber has frequently been attacked by policymakers in Congress.2 Much of the existing literature on the subject, however, has been descriptive in nature and somewhat inadequate for economic policymaking. In fact, in their 1981 report the Congress, the General Accounting Office mentions this deficiency and urges the Secretary of Agriculture (p. 37) to develop a new analytical framework and expand its analytical capability deal with tax policy. . . and related considerations as they affect . .. .the performance of the timber industry in the private sector. Proper economic policy analysis of this issue requires measuring tax incidence and welfare loss throughout the economy, which can only be done with a quantitative, general equilibrium model. This study presents the results of a quantitative analysis of the economy-wide impact of the capital gains treatment of lumber. Section II reviews the history of federal capital gains timber taxation and outlines the current con-

Cost-Effectiveness of the 1979 Forestry Incentives Program

Abstract In 1979, the Forestry Incentives Program increased the productivity of nonindustrial private forests by encouraging landowners to manage more intensively than they otherwise would. The increase will amount to almost 1 3 billion cubic feet of timber over the first rotation. Investments by the federal government and landowners will return about 8.6 percent above inflation. Federal taxes these owners will pay on their additional timber income have a present value of over $2 for every dollar expended through the program.

Inflation and Present Value of Timber Income after Taxes

Abstract Where a guiding rate of interest fluctuates with the inflation rate but remains constant in real terms, present values of future timber income after property taxes or yield taxes tend to be independent of inflation. After capital gains taxes, however, present values decline with increases in the projected inflation rate. The decline becomes less significant with lengthening payoff periods.

Factors Influencing Timber Sales on Grazing Properties in Northern New South Wales

SUMMARY Timber sales from a group of 31 grazing properties are analysed for each year from 1971 to 1976. Timber sales appear to have followed strong and consistent patterns over this time, with both timber and cattle prices influencing fellings. Timber income has been a significant supplement to cattle income in times of hardship. But even after three years of relatively heavy fellings, the properties still have some 25 percent of their land under forest. The quantitative analysis is a basis for discussion of increased government control over fellings on private, freehold land.