Mr. SANDLIN. Did not your Bureau in cooperation with the Bureau of Agricultural Economics engage in a study of this situation? Mr. CLAPP. Yes, sir. Mr. SANDLIN. Their appropriation was cut out for that work was it not? Mr. CLAPP. I do not know. FOREST-FIRE COOPERATION Mr. SANDLIN. The next item is for forest-fire cooperation, as follows: For cooperation with the various States or other appropriate agencies in forestfire prevention and suppression and the protection of timbered and cut-over lands in accordance with the provisions of sections 1, 2, and 3 of the act entitled "An act to provide for the protection of forest lands, for the reforestation of denuded areas, for the extension of national forests, and for other purposes, in order to promote continuous production of timber on lands chiefly valuable therefor", approved June 7, 1924 (U.S.C., title 16, secs. 564-570), as amended, including also the study of the effect of tax laws and the investigation of timber insurance as provided in section 3 of said act, $1,198,619, of which $23,859 shall be available for departmental personal services in the District of Columbia and not to exceed $1,500 for the purchase of supplies and equipment required for the purposes of said act in the District of Columbia. Mr. SILCOX. The following statement is submitted in explanation of this appropriation: Increase, Budget, 1935, compared with estimated obligations, 1934. $1,775, 000 1, 611, 580 1, 587, 513 1, 190, 635 1, 198, 619 7,984 There is a reduction of $388,894 in the 1935 estimate of $1,198,619 as compared with the appropriation of $1,587,513 for 1934. This reduction consists of: Impoundment of 6% percent of 15 percent pay cut.... Curtailments in 1934 working funds.. Increase in 1935 working funds for payments to States. 5 percent salary restoration.. -$6.683 -390, 195 1 +14, 259 2 - 11, 288 +5, 013 -388, 894 The increase of $14,259 will be systematically distributed to the various State allotments for the em ployment of State fire-control organizations. The decrease of $11,288 is due to the elimination of the forest insurance studies at the Pacific Northwest Forest Experiment Station, located at Portland, Oreg., and curtailment of the taxation inquiry. WORK DONE UNDER THIS APPROPRIATION Investigations of forest taxation and forest insurance. The purpose of investigations in forest taxation is to establish the fundamental principles upon which forest taxation should be based and to cooperate with States in working out legislation which will conform to these principles, and at the same time be adapted to the varying conditions in the several States. As a basis for conclusions it has been necessary to collect, analyze, and interpret a wealth of data on such subjects as: The economic and legal background of the entire system of taxation in individual States; the financial structure and existing tax system of States, counties, and minor political subdivisions; expenditures for roads, schools, and other governmetal functions; the practical operation of the taxation system in general, including its effect on different classes of property, assessment practices, etc.; existing State forest tax legislation; the actual effect of existing laws on the use of land for growing timber; methods and results of forest tax legislation in European countries where forestry is well established. A comprehensive formal report, bringing together the fundamental researches of the inquiry to date and presenting conclusions and recommendations, will be completed for printing this year. In order to stimulate progress in forest tax reform by the several States, and to facilitate the application of remedies recommended by the inquiry, it will be necessary to supplement the work already done with localized application studies in cooperation with the interested States. Recognition of the seriousness of the obstacle to private forestry presented by taxation of forests under the unmodified property tax, and of the difficulty of formulating satisfactory systems lead Congress to authorize this study. The importance of it has been further emphasized, first by the economic depression with the acceleration of tax delinquency and instability in forest land ownership generally, and now by the application of the quid pro quo principle of the conservation commitments of the N.R.A. lumber code. The industry is urging comprehensive public measures to improve forest taxation as an outstanding essential to the widespread application of private forestry contemplated by the code. This is an added reason for the application studies mentioned, although they would be a necessary and integral part of the forset taxation project under normal circumstances. The purpose of the forest insurance investigation now being conducted is to determine under what conditions privately financed fire insurance on growing forests and mature timber is feasible and to work out a satisfactory basis and form for such insurance. The importance of reasonably priced fire insurance facilities is being given added emphasis by the sweeping expansion of private forestry contemplated under the forest products industries' codes. The work has included the collection of a mass of statistics on forest fires, weather conditions, forest cover, etc., and appraisal of damage caused by fire under different conditions and ratios of log values as a basis for rating schedules. The project, conducted by the Pacific Northwest Forest Experiment Station, was initiated in and is practically completed for the douglas fir section of Washington and Oregon. Field work has been completed for the pine forests in these States and California and for the pine-fir type in California. Analysis of the data thus obtained is to be completed this year. Cooperation with States in forest fire prevention and suppression. In the fiscal year 1934 the Federal Government is assisting 39 States, including Hawaii, in the protection from fire of about 225 million acres of privately owned and Stateowned forest land. The fact that there are still over 190 million acres in great need of similar protection, but receiving none, indicates the urgency of Federal support of this work. Administration of this activity is handled in each State by the State forestry department; the Federal Government provides a portion of the necessary funds and brings to the aid of the States the composite experience and knowledge gained through Nation-wide contact with the forest-fire problem. Plans and budgets are submitted to the Forest Service by the cooperating States which must have joint approval of the Federal Government and the States before they are put into effect. Expenditures reported by the States are the basis for the receipt by the States of their share of the Federal appropriation. The aggregate amount of State and private money budgeted for this work in the fiscal year 1934 is very nearly four times the sum of Federal money budgeted for these projects. During the calendar year 1932 forest fires burned over 1.08 percent of the 223,000,000 acres of private and State forest land which was cooperatively protected. The corresponding percentage of the nearly 200,000,000 acres which received no protection is estimated at 20 percent. The number of fires reported for the protected area was 55,575, while on the unprotected area nearly twice that number was estimated, or 105,899. The total damage from fire on protected areas was estimated as $6,900,000 as against a total of $45,580,000 on the unprotected area. The maintenance of the protection effort of the public is essential if the protection improvements of the Civilian Conservation Corps are to be adequately maintained and utilized. Progress in cooperative forest fire protection is roughly indicated by the follow ing expenditures and budget figures: State summary of allotments, Forest Fire Cooperation under section 2 of the Clarke quately protecting State and private forest land McNary Law TAXATION INQUIRY AND INSURANCE Mr. HEADLEY. Mr. Clapp will explain the taxation inquiry and insurance portion of the item. Mr. CLAPP. The allotment for the forest-insurance work is eliminated, which means a reduction by $7,840. That work has been under way in the West, first of all, in the douglas fir region, and then to a much more limited extent, in the pine forests of Washington, Oregon, and California. It has involved getting together and analyzing a mass of statistics of forest fires as a basis for possible rating schedules for insurance and to determine whether forest fire insurance is a feasible thing, or not. Mr. SANDLIN. Did you find out whether it was feasible, or not? Mr. CLAPP. Not yet. One decidedly disturbing factor was the killing during the last fire season in a single fire, of 12 or 13 billion feet of timber. That was one of the most destructive fires in the Northwest. This much is certain, that it will not be possible to apply a plan for forest insurance if only one region is covered. It will have to cover at least three, and, perhaps, more major forest regions. We are not yet certain even then whether it will be feasible in the douglas fir region to specify a rate which is low enough. Possibly that feature of it will be worked out before the close of the year, when the work will have to be discontinued unless emergency funds are allowed. FOREST TAXATION In reference to forest taxation, we have made the most intensive and comprehensive survey of this complex question that has ever been made in the United States, and 2 or 3 plans, or 3 plans, to be more specific, on taxation have been worked out by the staff. them, for example, they call a deferred timber-tax plan. If you care to have me do that, I will give you as briefly as possible the essence of that plan. Mr. SANDLIN. All right. Mr. CLAPP. In the first place, it is a property tax. There will be a tax on the land value which would be collected annually. Then, on the timber, there would be an annual assessment, and in years when there was no income from the timber, the tax would be deferred and allowed to accumulate without interest. In years when there was income, it would be collected. Mr. SANDLIN. Are you talking about the Federal taxes? Mr. CLAPP. These are State taxes. In years when there was an income, the tax would be payable up to some limit fixed by law; perhaps, on 40 percent of the stumpage value of the timber. Then it would be necessary, because of the irregularity of payment or the nonpayment of taxes on timber, for the State to act as a banker, and distribute the tax to the counties or townships, or local political subdivisions, so they would not have to go through a period of very large income, which would be offset by periods of very low income. That is the essence of one of the three plans. The whole investigation has shown the need or possibility of very great improvement in the methods of tax administration in a great many States. In the assessments, for example, there are striking irregularities. That is something which will probably call for a State-administered system, in order to get uniformity. Then, in many other States, the investigation has also shown the possibility of reducing the cost of local govern ment, without reducing essential services, through changes in county lines, and that sort of thing. There are subdivisions which grew up under entirely different economic conditions. " The next stage in this work on forest taxation will be one of active assistance to the States which are interested in modifying their forest tax laws. That includes the detail of members of the tax staff to different parts of the country, where they may adapt the general principles which have been worked out to the requirements of individual States. Mr. SINCLAIR. Have you determined, in any way, the probable value accruing to a forest each year, or the increased value of a forest each year through the growth of timber upon the land, and do you take that into consideration in making tax assessments on the land or assessments for taxation purposes? Mr. CLAPP. We have, of course, done a great deal of work-not under this appropriation, but under the forest-management appropriation on the question of growth of different kinds of timber. Mr. SINCLAIR. You have to have a basis for assessment to start with. Mr. CLAPP. Yes, sir. Of course, that data can be used by the assessors in making their assessments of the value of particular tracts. Mr. SINCLAIR. Ordinarily, what increment is there of standing timber per acre due to each year's growth? Mr. CLAPP. It varies within wide limits. In the virgin forests, such growth as there is is probably offset by the death of old trees. In younger stands of timber, it may range anywhere from 100 board feet per acre for a year up to 1,500 or even 2,000 feet in such forests as the redwood forests, which we were discussing this morning. Ordinarily from 500 feet up to 1,000 feet per acre per year would be an excellent growth. One of the difficulties in this whole question of forest taxation is the relatively long period it takes for a crop of timber to reach maturity, and the years during which there is no income. Mr. SINCLAIR. The plan of taxation you have outlined to us omits any taxes during the period of growth, when there is no income from the land or the forest. Mr. CLAPP. The tax on the timber would be assessed annually, but payments would not be required until there was an actual income from the cuttings. It would be carried on the books without interest. Mr. SINCLAIR. It would be paid at the time the income came in. Mr. CLAPP. A limit of not to exceed 40 percent was suggested, so it could be spread over a period of years while the cutting was going on, and thus avoid too much burden. COOPERATION WITH STATES IN FOREST FIRE PREVENTION AND SUPPRESSION Mr. SANDLIN. Who will discuss the item for cooperation with States in forest-fire prevention and suppression, under this same head? Mr. HEADLEY. Mr. Hastings will discuss that item. Mr. HASTINGS. This item represents the direct Service participation of the Federal Government through the Forest Service in the protection and development of private and State forest lands. We estimate that there are approximately 420,000,000 acres of State and private lands in need of systematic protection from forest fires. The great bulk of this land is in private ownership and some 195,000,000 acres of it are still without organized protection. In 1911, when work was |