NJAF 20(2) 2003 53 A Historical Review of Forest Property Taxes in Pennsylvania: Implications for Special Forestland Tax Programs Michael Jacobson and Marc McDill, Pennsylvania State University, School of Forest Resources, 7 Ferguson Building, University Park, PA. 16802. ABSTRACT: Since the late 19th century, many states have offered tax relief to forest owners. Pennsylvania has had three special forest tax programs. The first, passed in 1887, was a rebate to forest landowners and was intended to slow forest exploitation. In 1906, a county court ruled that the rebates violated the state’s constitution. In 1913, the state passed a yield tax law to encourage second-growth timber management. In 1939, this tax was also declared unconstitutional. Regardless of their constitutionality, few acres were ever enrolled in either program because of administrative barriers to participation, landowners’ fears of giving up too much control of their land, lack of publicity, and lack of clear benefits to landowners. The current law, passed in 1974, allows for current use assessment for farm and forestland. This program, known as Clean and Green, is intended to protect open space. Although there were 2,350,123 ac of forestland in 29 counties enrolled in the Clean and Green program in 2000, and in spite of changes made in the late 1990s, concerns remain about the effectiveness and fairness of the program. Attempts to modify both past and current programs have failed to address the program’s most significant problems. Perhaps it is time to rethink our entire approach to forestland taxation. North. J. Appl. For. 20(2):53–60. Key Words: Forest taxation, tax policy, forest history, land use. Until the mid-19th century, forests were abundant in Penn- sylvania, and timbering was minor. By the turn of the 20th century, however, only 20% of Pennsylvania’s original 27 to 28 million ac of forest remained. About half (14 million ac) had been cleared for agriculture, and heavy timber harvesting accounted for the rest (Wirt 1904). In 1860, Pennsylvania led the nation in lumber production. The state remained a major producer until about 1910, when it dropped to 15th in the nation as the state’s supply of mature timber shrank. Today, Pennsylvania’s forests have made a remarkable recovery: the state is one of the nation’s top hardwood producers and over 60% of the state is forested. Pennsylvania has had three different special forestland tax programs. What role did these programs play in the overcutting and subsequent recovery of Pennsylvania’s forests? What lessons can we draw from these experiments in forest taxation? To what extent do the current special forest taxes ensure the conservation of the state’s private forestland? Do special property tax programs have unintended consequences that policymakers should be concerned about? This article addresses these questions NOTE: Michael Jacobson can be reached at (814) 863-0401; Fax: (814) 865- 6275; E-mail: mgj2@psu.edu. The authors thank the Pennsylvania Hardwoods Development Council and USDA Forest Service Northeasern Area State and Private Forestry for their financial support. Copyright © 2003 by the Society of American Foresters. through a review of the history of forest property tax policies in Pennsylvania. Property taxes are an important source of revenue for counties, schools, and municipalities. In Pennsylvania, 98% of county and 80% of school district tax revenues come from property taxes (Duvaleix and Kelsey 2000). Yet property taxes are often blamed for forest management problems. Writers such as Fairchild and Associates (1935), Duerr (1960), Manning and Thompson (1969), Zivnuska (1969), and Gregory (1972) have suggested that property taxes can be biased against forestry because of the long time between timber harvests. Klemperer (1974, 1976, 1977a, and 1977b) has argued that the ad valorem property tax tends to depress forestland values more than other land uses, such as agricul- ture, potentially driving forestland into other land uses. As a result of such concerns, nearly every state has modified its property tax laws to provide special treatment of forests. Nevertheless, there is little consensus on the ideal way to tax timberland (Klemperer 1988). Property taxation is generally based on the real estate’s fair market value or “highest and best use.” Such a tax is referred to as an unmodified ad valorem property tax. How- ever, a variety of special forest taxes are used in the United States, ranging from modified assessments based on produc- tivity or current use values to yield taxes, rebates, and exemptions (Klemperer 1988, Chang 1996). With a tax Downloaded from https://academic.oup.com/njaf/article/20/2/53/4780019 by guest on 04 August 2022