New Means of Analysis Required for Policy Decisions Affecting Private Forestry Sector

GAO examined the relationship of federal capital gains tax treatment to overall timber production and reforestation by the private sector and the production potential of nonindustrial private forest lands. The forest industry has long contended that the timber capital gains tax provision has encouraged reforestation of the Nation's private forests. However, the tax law does not require that capital gains benefits be applied to reforesting or improving management techniques. Tax benefits are based on income from timber cut rather than on what the taxpayer spends for site establishment, reforestation, and timber management.