Forest taxation in multiple-stand forestry with amenity preferences.

This paper investigates the impacts of forest taxes within an age-class forest model where the landowner derives utility from both consumption and the amenity values of standing forest. The model generalizes the existing models used to analyze forestry taxes. It is shown how the age-class model enables a more detailed analysis of the substitution and income effects of various taxes. These effects are shown to be linked to the properties of the utility function and to the distribution of the landowner’s assets between forests and nonforest assets. The results indicate that for most utility functions, income effect is unlikely to dominate the substitution effect of taxes on forest owner timber harvesting decisions. Numerical examples are used to demonstrate how the tax impacts can differ in the short run and long run. The results imply that higher consumption levels combined with profit or sales taxation applied in forestry will effectively reinforce each other in increasing optimal rotations. On the other hand, a lump-sum tax may be used to counteract the impact of increasing consumption levels. [ABSTRACT FROM AUTHOR]