Ad valorem taxes on timberland in northeast texashttps://scholarworks.sfasu.edu/texas_forestry_papers/1027/thumbnail.jp

Shaw, Kenneth W.

Somberg, Seymour I.

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Stephen F. Austin State UniversitySFA ScholarWorksTexas Forestry Papers, No. 1-29, 1970-1976 Journals2-1973Texas Forestry Paper No. 19Kenneth W. ShawStephen F. Austin State UniversitySeymour I. SombergStephen F. Austin State UniversityFollow this and additional works at: http://scholarworks.sfasu.edu/texas_forestry_papersPart of the Other Forestry and Forest Sciences CommonsTell us how this article helped you.This Book is brought to you for free and open access by the Journals at SFA ScholarWorks. It has been accepted for inclusion in Texas Forestry Papers,No. 1-29, 1970-1976 by an authorized administrator of SFA ScholarWorks. For more information, please contact cdsscholarworks@sfasu.edu.Recommended CitationShaw, Kenneth W. and Somberg, Seymour I., "Texas Forestry Paper No. 19" (1973). Texas Forestry Papers, No. 1-29, 1970-1976. Book28.http://scholarworks.sfasu.edu/texas_forestry_papers/28TEXAS . , .• { , I I I . . . ;, ~ ; ' :•· : t'. ' ; ' ~ '; •. ~ . • ' ~· .. t l, ~ 1 '! ; : .._ 1: •') ' .II ,. >1 I· I ' I L,~ \ . ' h· ,. '~. ',· jt ·, t' ·' ' - ~ t FORlSTRY PAPlR NO. 19 - FEBRUARY 1973 SCHOOL OF FORESTRY STEPHEN F. AUSTIN STATE UNIVERSITY Nacogdoches, Texas AD VALOREM TAXES ON TIMBERLAND IN NORTHEAST TEXAS Kenneth W. Shaw and lf Seymour I. Somberg-Real estate taxes, as applied in Texas are potential deterrents to timber production, because assessments for taxes technically include timber as well as the land upon which it stands. A timber crop thus can be taxed at its current value each year during a rotation, which could be from 20 to 40 years or longer. To investigate the actual impact of the ad valorem tax system on the growing of timber, the 1969 tax rolls of 8 counties and 38 independent school districts in Northeast Texas (Fig. l) were re-viewed. Omitted from this study were consolidated school districts from which adequate data were not available. While assessment procedures varied among the taxing units, all agencies .attempted to group lands of comparable character and value, and to apply uniform values to such groups. In each tax-ing unit there was a minimum value at which most forest land was assessed. Variations above this "standard" minimum were more likely to reflect the potential value for development than a recog-nition of differences in values of standing timber. For each taxing unit, therefore the "standard" minimum forest land assessment was recorded and the basic tax per acre computed by applying the 1969 tax rate to this assessment. It is of interest that the basic values applied by the school districts lj Respectively, Forest Economist, International Paper Company, Georgetown, South Carolina and Professor of Forest Eco-nomics and Director of Research, School of Forestry, Stephen F. Austin State University, Nacogdoches, Texas. Based in part on a thesis submitted by the first named author in partial fulfillment of the requirements for a degree of Master of Forestry . 2 Figure I. Location of the independent school districts in eight northeast Texas counties where tax rates were investigated . Districts are identified in Column 2, Table I. 3 were rarely the same as those used by the county for the same class of land. Table 1 shows the school, county, :md state tax per acre in each school district, together with the accumulated value of such taxes, including interest at 6 percent, for a 20-year old pulpwood stand and for a stand at age 35. Minimum 1969 ad valorem taxes on timber land in the 41 taxing districts averaged $0.416 per acre. Rates were close to this average, except for one unit. The exception, Texarkana Consolidated School District assessed a minimum tax of $1 .9S per acre. This was done by applying a moderate tax rate ($1.80 per hundred) to an assessed value of $110.00 per acre. This school tax, together with stat e and county taxes totaled $2.1 3 per acre . The evaluation is much higher than those assessed by other taxing units. Since this district is largely in and near the suburbs of the growing city of Texarkana, it is obvious that assessments applied to forest land reflect its high potential value for urban development. The accumulated value of the Texarkana District taxes with interest over a 20 to 40 year rotation would approach the total expected value of timber growth. Obviously, under such circumstances it would not be economic to hold and manage land primarily for wood produc-tion. Among the other 40 taxing units the mean minimum tax per acre was $0.37 and the median rate $0.35; lowest rate was $0.19 and the highest (Texarkana excepted) was $0.61. The state and county portion of the total tax ranged from $0.10 to $0.23 per acre and averaged $0.172, while the school tax (again exclusive of Texarkana) averaged $0.22 with a range from $0.09 to $0.42. The impact of taxes on the economics of timber growing must be considered in relation to the income to be expected from timber produced. Table 1 includes calculations of cumulative tax costs, with interest at 6 percent for two rather widely accepted rotation ages. While production would vary widely with site and other factors, yields of 20 cords of pulpwood per acre at 20 years and 8,000 board feet of sawtimber at age 35, worth perhaps $100 and $400, respectively, are not unreasonable. Thus the median tax per acre ($0.35), equivalent (at 6 percent) to $12.80 at 20 years and $39.00 at 35 years would amount to 10 to 13 percent of expected income. At the same rate of interest, the lowest tax ($0.19 per acre)would be only 5 to 7 percent, and the highest ($0.6l)·would be 1 7 to 23 percent of potential income. Thus at the range of rates assessed in these 40 taxing dis-tricts, ad valorem taxes constitute a substantial, but not necessarily limiting element of cost in tim-er production. The impact of annual taxes also increases considerably as the applicable rates of interest in-crease. For any given annual tax, the accumulated investment at 20 years with a 4 percent interest rate is 81 percent of the value at 6 percent ; at 8 and 10 percent respectively, the respective invest-ment amounts to 155 and 243 percent of the 6 percent value. Thus when interest rates exceed 6 percent, accumulated investment in taxes, even at moderate tax rates, can approach or exceed ex-pected income from timber. Ad valorem taxes constitute only one of the several costs of growing timbe~. Others include costs for fire and other protection, cultural operations, management, and interest on investment. Except for unusual situations like the Texarkana Independent School District , these other costs are likely to exceed ·the cost of land taxes. Current rates of real estate taxes as assessed in the other 40 taxing units would be critical to forestry investments only where the sum of such other costs approached the expected value of timber income, or where applicable interest rates were considera-ly above 6 percent. 4 Table 1. Ad valorem taxes in eight .Northeast Texas counties, 1969 and corresponding cost over two rotation periods. Accumulated Tax, Map 1969 T~x with 6% interest County and Number School State and Total 20-year 35-year School District (Fig. 1) County rotation rotation! j --------- -----Dollars per acre--------------------- ) Bowie DeKalb 4 0.12 0.15 0.27 9.93 30.09 New Boston 5 0.18 0.15 0.33 12.14 36.77 Texarkana 6 1.98 0.15 2.13 168.39 264.19 Cass Atlanta 10 0.11 0.10 0.21 7.73 23.40 Avinger 14 0.31 0.10 0.41 15.08 45.69 Bloomburg 12 0.30 0.10 0.40 14.71 44.57 Hughes Springs 13 0.22 0.10 0.32 11.77 35;66 Linden-Kildare 15 0.25 0.10 0.35 12.88 39.00 McLeod 16 0.17 0.10 0.27 9.93 30.09 Pewitt 2 9 0.23 0.10 0.33 12.14 36.77 Queen City 11 0.09 0.10 0.19 6.99 21.1 7 Harrison Elysian Fieldsl 23 0.38 0.14 0.52 19 .1 3 57 .95 Hallsville 19 0.30 0.14 0.44 16.19 49.03 Harleton 18 0.22 0.14 0.36 13.24 40.12 Karnack 21 0.15 0. 14 0.29 10.67 32.32 Marshall 20 0.27 0.14 0.41 15 .08 45 .69 Waskom 22 0.42 0.14 0.56 20.60 62 .40 Marion Jefferson 17 0. 14 0.18 0.32 J 1.77 35 .66 Morris Daingerfield 8 0.18 0.07 0.25 9.20 27.86 Pewitt2 7 0 .23 0.07 0.30 11.04 33.43 Panola Beckville 36 0.31 0.23 0.54 19.86 60.17 Carthage 37 0.11 0.23 0.34 12.51 37.89 Elysian Fields2 38 0.38 0.23 0.61 22.44 67.98 Gary 39 0.12 0.23 0.35 12.88 39.00 Joaquin 40 0.18 0.23 0.41 15.08 45 .69 Tatum 2 35 0.23 0.23 0.46 16.92 51.26 Teneha2 41 0.27 0.23 0.50 18.39 55.72 Red River Clarksville 2 0.21 0.16 0.37 13.61 41.23 Detroit 1 0.24 0.16 0.40 14.71 44.57 Talco-Bogata 3 0 .15 0.16, 0.31 11.40 34.54 Rusk Carlisle 29 0.06 0.18 0.24 8.83 26.74 Cushing 31 0.15 0.18 0.33 12. 14 36.77 Henderson 28 0.27 0.18 0.45 16.55 50.15 Garrison 34 0.11 0.18 0.29 10.67 32.32 Kilgore 26 0.32 0.18 0.50 18.39 55.72 Laneville 32 0 .11 0.18 0.29 10.67 32.32 Mt. Enterprise 33- 0.30 0.18 0.48 17.66 53.49 Overton 24 0.23 0.18 0.41 15.08 45.69 Rusk 2 30 0.23 0.18 0.41 15.08 45.69 Tatum 27 0.23 0.1 8 0.41 15.08 45.69 ) } Table 1. (continued) County and School District Map Number (Fig. 1) School 1969 Tax State and County 5 Accumulated Tax, Total with 6% inte.-=-re=s;,=-t,--_ _ 20-year 3 5-year rotation rotation 1 ---------- ----Dollars per acre--------------------West Rusk 25 0.12 0.18 0.30 11.04 33.43 Mean 0.22 ll Assuming no change in taxes during the entire period. :?:./Districts which include parts of 2 counties. 0.17 ~With the exception of the Texarkana Consolidated School District. 14.24 43.14 

Texas Forestry Paper No. 19

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Texas Forestry Paper No. 19

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