March Membership Meeting--Timber Tax Issues by Ruth Kistler
Our March meeting program was Timber Tax Issues. Jean Cowan started us off with a summary of the timber bills now before the Legislature:
• HB2379 – Rep. Holvey’s bill would replace the current Timber Harvest Tax with a 5% Severance Tax on the value of timber when harvested. Proponents of the bill feel strongly that the current system costs Oregon and its counties millions in revenue. The bill faces a challenge in that it would need a 3/5 majority to pass.
• HB2072 – retains the current Timber Harvest Tax and is expected to pass, as it does biennially, with-out change.
• HB2357 – seeks to reallocate half the Oregon Forest Research Institute (ORFI) harvest tax funding to a new Sound Forest Practices sub-account within ODF, and add 2 new environmental members to the OFRI board. OFRI has been criticized as being a lobbying arm of the timber industry, rather than serving its educational and conservation aims. This bill is considered unlikely to pass.
Then Jody Wiser of Tax Fairness Oregon joined us and presented a power point about timber taxation, what it has been, what it is now, and how we compare to Washington State.
Nearly half (48%) of Oregon is forest. The forests are owned by the federal and state government, tribes, and large (5,000 acres or more) and small private landholders. Large private landholders own 22% of the forestland but produce 65% of the timber harvest. Timber harvest has been fairly steady since 1992 at about 4 billion board feet per year, yet during that period timber taxes have declined dramatically.
Here’s a brief history of timber taxes in Oregon. Originally Oregon’s property tax on forestland was based on the value of the growing trees as well as the land. After harvest, many owners abandoned their forestland (stopped paying the property tax) because it had little value to them. To curb that practice, in 1929 Oregon stopped taxing the value of trees while they were growing and introduced a severance tax on the value of cut timber. Over the decades taxing of private forestland, trees, and harvested timber have changed several times. Since 1947 Oregon has had a modest severance-type tax called the Forest Products Harvest Tax. It funds timber industry related costs and is currently about $16 an average truckload of logs. The most recent severance tax, phased out in 2002, returned revenue to the counties from which the trees were cut. If that tax were still in effect, Lincoln County would be receiving about 2 million dollars per year in severance tax revenue.
In addition to counties getting less revenue, the state has lost much of its former corporate income tax revenue from timber. The companies have changed their ownership structure to Real Estate Investment Trusts (REIT) and Timber Investment Management Organizations (TIMO) which pay no Oregon corporate income tax. (Weyerhaeuser is now a REIT.)
Both California and Washington State have severance taxes that are largely returned to counties. Compared to Washington State, Oregon harvests 46% more trees, but our severance tax, the Forest Products Harvest Tax, collects only a third of what Washington’s collects. Washington returns 80% of severance taxes to the counties. Oregon’s Forest Products Harvest Tax goes entirely to “timber-related-issues”, none to the counties.