value for a forest landowner is determined not by the owner's land-use practice but by the development of neighboring properties. The agrarian property-tax system has become outdated. Many forest landowners near developing areas have been forced to sell their land, because annual revenue from the land could not pay the annual ad valorem property taxes. Even the most productive forestlands cannot survive as forests if property taxes exceed the break-even threshold. Moreover, the ad valorem tax penalizes landowners for holding older-age trees (Northern Forest Lands Council 1994). The ad valorem property-tax policy produces many of the largest negative effects on stability and sustainability of private nonindustrial-forestlands.
Little attention has been given to the use of tax policy as an economic incentive for private investment in watershed-management activities, protection of scenic beauty, recreational opportunities for the public, and preservation of forest ecosystems for certain types of flora and fauna. Although the potential effectiveness of tax credits (or tax penalties) to influence private forestland activities has yet to be explored, they might be considered for landowners who would invest for purposes other than (or in coordination with) timber and related forest products (Hudson 1993). Level of compliance with Best Management Practices could be used to determine the amount of incentive provided.
A serious void in the design of tax policies that focus on the management of private forests when viewed as a public investment is the lack of rigorous analyses that clearly show the consequences of tax measures (Klemperer 1989). Little analytical attention has been paid to evaluations of the rates of return to the public sector from reduced tax rates for beneficial forestry activities. Analysis of returns to the public via direct cost-share payments to landowners is extensive. However, analysis of the rates of return on foregone revenue resulting from federal tax subsidies is rare.
Government regulation of private-forest practices reflects growing public concern over the integrity of forest and related ecosystems. However, regulatory programs are not without problems. They are often a burden for users, managers, and owners of nonfederal forests, especially private forest landowners. Yet, when society's interest in maintaining and enhancing forest ecosystems is evident, owners and managers of forest resources are obligated to examine the range of programs available for achieving such interests. It is critical to realize that the structure and administration of federal, state, and local regulatory programs vary greatly. Many innovative, imaginative approaches emphasize adaptive management, administrative flexibility, and landscape-level resource management and protection.