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Impacts of forest tax under timber price uncertainty

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  • Gong, Peichen
  • Susaeta, Andres

Abstract

We examine the effect of forest taxes on the optimal harvest decision and the forest land value using an adaptive optimization framework– the stand is harvested when the stumpage price is equal or higher than an age-dependent reservation price. We prove that the site value tax or site productivity tax does not change the optimal reservation prices; the timber value tax reduces the optimal reservation prices; the yield tax increases the optimal reservation prices when the non-timber benefits are increasing with stand age, or when they are independent of the stand age and the regeneration cost is positive; and the unit harvest tax increases the reservation prices when stand age is relatively high and could reduce the reservation price when stand age is low. Numerical results show that the optimal harvest age is only sensitive to the unit and timber value tax. The tax burden is reduced for all types of taxes except the site value tax. Under a taxation budget constraint, recognition of stumpage price uncertainty may change forest owners’ preferences for different types of taxes.

Suggested Citation

  • Gong, Peichen & Susaeta, Andres, 2020. "Impacts of forest tax under timber price uncertainty," Forest Policy and Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:forpol:v:111:y:2020:i:c:s1389934119303880
    DOI: 10.1016/j.forpol.2019.102030
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    References listed on IDEAS

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    1. Koskela, Erkki & Ollikainen, Markku, 2001. "Forest Taxation and Rotation Age under Private Amenity Valuation: New Results," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 374-384, November.
    2. Chang, Sun Joseph, 2018. "Forest property taxation under the generalized Faustmann formula," Forest Policy and Economics, Elsevier, vol. 88(C), pages 38-45.
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    7. Amacher, Gregory S. & Brazee, Richard J., 1997. "Designing Forest Taxes with Varying Government Preferences and Budget Targets," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 323-340, March.
    8. Gregory S. Amacher, 1999. "Government Preferences and Public Forest Harvesting: A Second-Best Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 14-28.
    9. Alvarez, Luis H.R. & Koskela, Erkki, 2007. "Taxation and rotation age under stochastic forest stand value," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 113-127, July.
    10. Chang, Sun Joseph, 2018. "Forest valuation under the generalized Faustmann formula with taxation," Forest Policy and Economics, Elsevier, vol. 88(C), pages 46-51.
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    Cited by:

    1. Daigneault, Adam J. & Sohngen, Brent L. & Sedjo, Roger, 2020. "Carbon and market effects of U.S. forest taxation policy," Ecological Economics, Elsevier, vol. 178(C).

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