Still seeking a consensus on ‘fairness’ issue

Mar 22, 2024 | Author: Mike Barsotti, President, Linn County Small Woodlands Association | Editor: Nancy Hildebrandt

President's column

How much should forestry be taxed remains a central question

The 2024 Legislature has gone home and the bills that will become law did not damage the forest sector. One bill that attempted to add a severance tax on forestry did not receive much support. It died after one hearing. Bills to increase taxes on the forest sector have come up in the past and are sure to come up again.

For me, the issue to address is not should there be a severance tax on timber harvests but what is a fair amount forest landowners should be taxed?

There are so many news articles on how unjust the loss of the severance tax in the 1990s and early 2000s was that I don’t think the issue will go away until there is consensus on how much forestry should be taxed. These news articles have a common theme — that it’s not fair that the severance tax was eliminated.

Fairness is not just a moral or economic issue, equity of a tax burden is a constitutionally sanctioned right of the equal protection clause of the 14th Amendment. It mandates that individuals in similar situations be treated similarly.

In working to define what is fair, It might first be well to address why we pays taxes. I can think of a few. Individuals and businesses receive benefits from services provided such as roads and utilities, and both individuals and businesses can only function if there is a stable, healthy society. So again, what is the fair amount forest landowners should pay to cover the services they receive and support a stable healthy society?

Looking back on how forest lands have been taxed in the past does not seem to help. Forestry and forest taxes have evolved since Oregon’s statehood in 1859. This evolution has been in both the land and the trees. Initially, timber harvest was considered an extraction like rock and other minerals. Replanting was rarely done as it seems too risky with wildfires. Also, so little was known about forest management.

As the timber that came with the land was harvested, tax values for the land and timber were considered separated. In 1929, the Legislature passed the Forest Fee and Yield tax program in recognition that the land had little value after the old growth timber was harvested. In 1977 the tax on timber in Western Oregon moved from being collected annually to a severance tax paid at harvest when there was income to pay the tax. In 1990 the passage of Ballot Measure 5 put limits on property tax rates and it was unclear if the severance tax on harvested timber was an ad valorem tax and therefore subject to BM 5. The 1991 Legislature clarified it by defining the severance tax a privilege tax.

As timber harvest evolved from extracting a product from the land to a crop produced through management, a type of farming, timber harvesting became comparable to crops harvested in agriculture.

It seems to me that a severance tax can be challenged through the equal protection clause of the 14th Amendment — individuals in similar situations require that they be treated similarly. Farmers are not taxed on the products they produce; and therefore, forest managers should not be taxed on the products they produce.

Arguing that there should not be a severance tax on forest products does not answer the question “what is a fair tax forest landowner should pay.”

While I have no idea what the amount should be, I can think of several factors to consider. For example, the Oregon Legislature has recognized that a prosperous computer chip industry is good for all Oregonians; and therefore, has worked to assist it in multiple ways. A prosperous forest industry is also economically beneficial for all Oregonians; and therefore, is seems that the Legislature should consider this in searching for the fair tax forest landowners should pay.

To have a prosperous forest industry, our Legislature should consider what other states which are our competitor are taxing their forest industry.

Looking what other business sectors pay for services and in support of our society, but it should be factored in that the forest sector is unique in that revenues are not annual but only comes a couple of time during the life of a timber stand.

And finally but not least to consider, a healthy forest sector benefits our environment with wildlife and fish habitat, clean water, clean air and carbon sequestration. Forest taxation should not weaken but strength these benefits.

Power moves by a group will not solve this complex question of what is fair, and there is not a simple answer. Oregon has addressed complex issues in the past such as land use planning, and I’m sure we have leaders that can guide us again in finding consensus on what is fair.