This gives timber producers an interest-free loan from the government and effectively reduces their tax rate on investments to zero. When combined with capital gains treatment, timber receives a negative tax rate or a net benefit. This lowers the tax burden on timber in general. It distorts the market by diverting investment into timbering that might have otherwise gone to other businesses. In addition, the bulk of these tax benefits flow to corporations and wealthy investors.
Forests serve multiple purposes.
They provide habitat for wildlife, medicines, recreational benefits for hikers, fishers, and hunters, as well as timber products. Unfortunately, the current tax breaks treat forests like farms rather than ecosystems, which must contain a diversity of plant and animal life to survive. In addition, these breaks make timber production more profitable for investors and forest products cheaper, which hurts recycling efforts. Better than tax incentives for timber production would be incentives that encouraged recycling, and environmentally friendly pulp and paper alternatives. Return to Dirty Little Secrets Table of Contents .