POLICY IMPACTS ON AMERICA'S PRIVATE FOREST: CASH GRANTS vs. TAX INCENTIVES
By Wm. C. Humphries, Jr., ACF

The conservation and management of forest resources owned by the nation's private non-industrial landowners have been discussed for years. The private owners have been a target of numerous government incentive programs for decades. Yet, the perception of problems with this ownership class has continued. Government programs have been largely ineffective at increasing production on forest land. Why?

Our political system, which favors cash incentive or grant programs, is aimed at the greatest number of people rather than the greatest number of forest land acres. According to preliminary results of a comprehensive study provided by Thomas W. Birch (United States Forest Service) of the private forest landowners of the United States, in the South (Virginia to Texas) twelve percent (12%) of the people own eighty-one percent (81%) of the forest land in the 50-acre plus ownership category. These are the private landowners who provide the nation with benefits produced by the forest including wood products, recreation, and many other tangible and intangible environmental values. Yet, programs are aimed at numbers of people while ignoring the mass of acres. If grant program funds are distributed based on an ownership pattern, it stands to reason that only 12% of funds will go to landowners in the 50-acre plus ownership class, while 88% of funds will go to only 19% of the privately owned acreage. How can government grant programs be effective at influencing forest stewardship when 81% of the land is effectively ignored? They can't! To make a real impact on forest stewardship, policymakers must concentrate on the 50-acre plus ownership class that owns 81% of the acres. It is this class of owner that is motivated strongly by the economics of ownership. Additionally, it is this ownership class that has the private capital to invest. But, current tax policy favors short-term investment and discourages long-term, relatively illiquid investment -- forest investment.

For the most part, government grant programs do not motivate landowners in this ownership class. Tax incentives do motivate. Because they are motivated by economics and guided by good business judgment, the tax structure must be altered so that the incentive to manage, conserve, and produce fiber and forest values is enhanced. These owners are not motivated by grants with regulatory strings attached. Clearly voters in recent elections are telling us that there is a suspicion of bigger and bigger government, that government fails to understand real people with real problems. Private timberland owners agree with these voters. These owners recognize that grants are effectively tentacles of special interest and regulatory bureaucrats rather than encouragement toward stewardship of the family forest.

Cash grants versus good tax incentives....let's compare:

CASH GRANTS

TAX INCENTIVES

Require public (tax payer) investment. Require private (owner) investment.
Encourage dependency on government. Encourage self dependency.
Are inefficient because they require bureaucratic administration. Are efficient because there is little government involvement.
Are handouts that discourage personal sacrifice (investment). Encourage personal sacrifice (investment) and foster stewardship, pride, and self-reliance.
Are enticements or bribes to get landowners to adopt someone else's objectives. Are a non-threatening enablement that allows the landowner to fulfill his/her objectives.
Require regulatory enforcement because of conditions attached to grants. Require no additional regulatory enforcement and can be managed through existing treasury requirements.
Feed a "something for nothing" culture and sustain the poor manager (landowners). Starve the slothful, poor manager allowing land to gravitate through the market place to the more efficient managers (landowners).
Are fundamentally contrary to a free enterprise system. Fundamentally support and encourage the free enterprise system.
Are mostly socialistic. Are more democratic.

If government policy is to be effective, policymakers must recognize the resource base (81% of the forest land), the motives, objectives, and economic needs of the owners of this resource base, then enact a tax system that encourages private investment and good personal forest land stewardship. This encouragement does not exist in today's tax policy, and cash grants never have been and never will be effective policy.

We must recognize old programs like the Soil Bank program as an agricultural program, not a forestry program. While agricultural (crop retirement) programs may beneficially cause trees to be planted, they are not a product of deliberate/direct forestry policy. Therefore, forestry bureaucrats must drop this crutch as support that grants work and acknowledge the real issue --- 81% of our land base in the South needs private investment capital, and good tax policy will be one major catalyst to encourage this investment. In the long-term, our landowners will profit, our forest industry will profit, and society will profit through an enriched treasury collecting tax from more production.