Natural Forests vs Oregon Schools

"Forest vs Schools"

"The Land Board decided to limit Common School Fund releases to 4 percent for the remainder of 2017 — $58.6 million."

In 1999, Kitzhaber signed HB 3575 into law. This bill let large private forest owners (5,000+ acres) off the hook on timber harvest "privilege" taxes. These taxes originally went to K12 education. The annual loss from this unearned subsidy is, ironically, about $60 million a year. Were this "privilege" tax still collected, it would double or replace 2017's meager School Fund release.

The 1999 rescinding of this harvest "privilege" tax has, to date, lost Oregon about $1 billion dollars in potential revenue. Had this tax been collected over the last 18 years instead of canceled, it would have easily covered the reported $600 million dollar School Fund shortfall.

Tax reformers seeking to increase taxes should start with reading Oregon's 2017-19 Tax Expenditure Report. This Report itemizes billions of dollars in continuing tax subsidies granted to "privileged individuals and institutions". Before our leaders seek to sell public forests or log more public timber to fund schools and services, they should also read this Report. The funds they seek are there.

Among the billions of dollars listed in tax subsidies, there are other large timber tax subsidies that are never mentioned by county commissioners or legislators. Until 1978, standing timber, real property in Oregon, was taxed annually, pouring hundreds of millions of dollars into general funds every year. In 1978, Oregon’s legislators decided to treat standing timber as a crop for taxation purposes, a “crop” to be supposedly taxed at harvest.

Their caveats for granting this huge property tax exemption were to ensure "The State's policy of encouraging the restocking of forestlands to provide present and future benefits by enhancing the water supply, preventing erosion, providing habitat for wildlife, providing scenic and recreational opportunities, and providing for needed domestic products."

Over the ensuing decades, entire watersheds were clearcut by out-of-state corporations and hundreds of thousands of acres were left unstocked. Crucial salmon bearing watersheds, denuded and eroded, became slash filled eyesores. Unable to compete with Asian log exporters for “needed products”, many domestic mills closed and thousands of American jobs were lost. Thus, the intended conservation caveats for this huge property tax exemption, never operationally defined, went mostly unenforced.

A succession of biennial Expenditure Reports imply that about $15 billion dollars in real property taxes have been lost since privately owned standing timber was exempted in 1978. This years potential property tax loss on the standing timber exemption is about $250 million dollars with about $45 million in property taxes "shifted" to we less privileged property owners.

In the 2017-19 Expenditure Report, Governor Brown says "We should ensure the tax expenditures outlined in this report make as much sense for Oregon today as they did when first enacted, particularly in these fiscally tight times." Do these largely unearned tax “expenditures” (subsidies) for private forest owners still make as much sense for Oregon today as they did in 1978? Not hardly.

Oregon's Office of Economic Analysis reports about 75,000 people were employed in the wood products industry in 1978 compared to 25,000 today. The timber industry’s contribution to Oregon’s Gross Domestic Product in 1978 was 12%. Now it’s reported at barely 2%!

Considering timber industry’s dwindling influence on Oregon’s workforce and economy, is it fair to continue their historic tax subsidies? The history of timber taxes is one of industry lobbyists, hidden from public scrutiny, often writing their own tax policies. These policies would have been challenged years ago had they been publicly discussed, especially the “double scoop” granted to forest owners of over 5,000 acres.

For example, Weyerhaeuser, an out-of-state corporation, Lane County’s largest private landowner and log exporter, pays about a fortieth (that’s 2.5%!) of the property tax on every dollar of real market value that most of us pay on our homes. On top of this, they receive millions of dollars in timber harvest tax relief. Why not reduce their disproportionate tax subsidies rather than increasing our property taxes to cover funding shortfalls?

Oregonians should’ve been released from the bondage of having to sell public forests or log more public timber to fund schools and services long ago. If, however, our leaders decide that Oregon’s forests must still “pay their way”, why not fairly tax private standing timber and industrial timber harvesting? The proceeds could go a long way toward funding schools and services.

Roy Keene has cruised, evaluated and brokered private forestlands for 40 years in Oregon.