State forestry tax change
Wisconsin
The Sawyer county paper had a breakdown on how our real estate taxes are being set. Included in the article was the following.
"Missing from this year’s property tax bill is the state forestry tax. The 2017-19 state budget eliminated it, at a cost of about $90 million annually; forestry programs will be funded from state income and sales taxes in the future."
Seems fair in that the cost of state forests will be spread among everyone that is in the state instead of just property owners. Even non residents will contribute every time they buy a taxable item in Wisconsin.
I predict, that it will be state income taxes will also be lowered in the near future, which will affect the program
Everyone who lives on real estate rented or otherwise contributes to the property tax base.
This was a horrible move. The mil tax provided a stable, long term funding system. Forest management requires long term planning, not right for budget dollars every two years. Same goes for forest fire protection. This is the epitome of short sighted.
When they say "forestry programs will be funded from state income and sales taxes in the future.", that is a polite way of saying "general fund".
Shook said it best, short-sighted. All it amounts to is a general tax savings in one spot but taken from another (rob Peter to pay Paul).
The ripping apart of our environmental assets....I will stop there, I'll just leave it at disappointed.
Well when we continue to elect short sighted politicians why should we expect anything more than short sighted solutions.
Why should I as a property owner have to fund public land for all to use through property taxes?
I appreciate the fact that everyone will be contributing now. Add the fact that lots of logging is taking place and will add revenue to the fund.
Why have all the funds if only one is needed? It would seem like a simplified process to me.
It is a complicated matter. Like Skook says, now the Forestry budget has to "bid" for money (funds). This cannot be done efficiently all the time and is no guarantee to programs support. When it was presented as "tax savings", people gobbled it up not understanding the ripple effect. It is a common question "why should I pay". It is now a problem, when money comes (bid) from a general fund, it is highly scrutinized. This normally is a good thing to prevent Golden Fleece. However, when there are heads of finance that don't understand forestry deciding if the Forestry projects are worthy (accepting bid from General Fund), the issue is huge. The Forestry Mil tax was targeted simply as a feather in cap!
OK so I guess my first impression of this being a good thing was wrong.
The answer Jeff is, it depends. Under the guise of "property tax" savings, yes. However, money doesn't grow on trees. When money does get appropriated for forestry objectives, it comes from general fund. The general fund is also supported via tax assessments.
The bad comes in that there will be a bidding process to get funds for forestey activities of past. This is hard to budget let alone win in a bid against countless others begging for money. All it takes is a strike of a pen to say "better luck next time" by a governor who may or may not understand forestey objective. It all had started to play out now. Unfortunately, forestry is now taking a back seat in a State where forestry needs to be very strong. This doesn't bode well when the capital is in Dane county. You think those people believe in cuttting gentle forest trees?
I have been in the working world since 1974 and had many many bosses that were major decision makers who had flashy degrees from major accredited Universities. They new nothing about the intracasies of our business. We survived by having lower ranking bosses that did know the business and in some cases that didn't work. We survived.
People are passionate about both sides of any situation biased by unwavering emotions or their current or past employment. It's well known that some have a distain for our current gov in Madison. Guess what, some think we are doing well as a state. Not everyone will be happy. Teachers were one and we heard our students would suffer but they didn't.
Every year since I arrived in Wi in 2001, the cities of Milwaukee, Racine, and Kenosha dump tons of raw sewage into Lake Michigan. For the life of me I can't believe we are doing that and it happens along the shores from all cities and states.
Its all about money in everything we do and it will involve our passions either for "good" or "bad"
So does the income from logging go to forestry or direct to the state general fund? Did or will that change?
Revenue from timber sales on State land and income from the work we do on the CNNF under the Good Neighbor Authority goes into the general fund.
For those that ask why should I pay? Don't forget that one of the hundreds of functions of the Division of Forestry is fire control, storm recovery, and disaster response.
Another change was the elimination of the stump tax for timber cut on MFL properties that get a big tax break for being in the program. The tax was a % of gross sales but on an out dated rate scale by board feet that would not collected the full % amount, but thats ok as it was eliminated completely.
That was a change that happened two years ago and was unrelated to the mil tax.
Point is that the effect is less revenue to fund forestry and the money will have to come out of tax payer pockets. Another forestry tax that was eliminated and passed on to the tax paying public. Making land less costly to own.
Glynker, can you clarify what you are speaking of? If you are talking about MFL stumpage fees, they didn't directly fund forestry activities, instead, partitioned and paid at county and State level.
If you are speaking about the Forestry mil tax, that is correct, less, actually no longer, funding forestry activity. Indeed, tax burden for that is removed from property tax (dubbed "tax reduction") but forestry activity will be funded from general fund, still tax payer funded. Skook can explain better than I.
He's talking about the yield tax which was a fee paid on stumpage that was used to reimburse local government for the reduced taxes on MFL property. It was eliminated in April of 2016.
Thanks skookumjt, if the point was that changes shifted payments to the general fund, i was just pointing out that when the stump tax was eliminated, the landowner who got the tax break did not have to contribute when he did sell mfl timber. Townships that have a lot of mfl properties put the burden on other landowners to get tax money to fund the township. It made sense to me that if you saved $35,000 in taxes over 10 years on 120 acres and sold timber worth $100,000, you owed $3-5,000 as a stump fee to help out. And the $35,000 was a return of principal so no income taxes are involved until you sell the land in which case, you might want to 1031 exchange and still not pay income tax. Hold the land till you die and the land goes to your heirs tax free. What a country.
Well, sounds like eliminating the stump tax was quite unfair to all the other property owners who now have to pay that stump tax via increases in their own property taxes. Even if they have no timber on their property.
Jeff playing the devil advocate, not all countys tax property the same, so you can not generalize increase in property taxes,,,,,,,,
I want to know where a forest owner make 100k in a sale. I'm hiring that guy!
Unfortunately, Woodland tax rates are excessive. If you want to grow timber for harvest, this happens very infrequently so the whole "stumpage fee" is also very minimal. Timber harvests are capital gains and that tax is where the recovery is made.
The disparity between farming agricultural land taxation and Woodland taxation in unbelievable, sadly. Like I have mentioned, many fall to needing money and rape the woods, this is DECADES of damage. Why would you not incentivise Woodland stewardship. Even in MFL, the tax rate is greater than agriculture! On top of that, agricultural land can get annual payouts in the form of CRP and other federal programs to help discourage overproduction.
In the end, the MFL program isn't the devil as some see it or sending taxes for others to pay. Woodland owners pay huge tax on tarvest income, they have an asset that we all benefit from. Who doesn't want fresh air and clean water.
The root of the problem is that wooded property not in MFL is taxed excessively. No income is made until harvests occur, this is why it is a good idea to manage wisely. Agricultural properties a at other end of the spectrum, low taxation. Talk about "fair-share" taxes!
Do not penalize timber producers, they are sacrificing constant income for land stewardship. The "thousands" of dollars saved is exaggerated.
Treefarm, why would you pay huge taxes on a timber harvest when it is a tax free return of principal? You must be in pulp country.
Taxes paid on harvest are impacted by "basis", i.e. what volume grew on your ownership clock. All timber is taxable. No such thing as tax-free in Woodland harvest. In the grand scheme, timber producers are raked over the coals from land tax to timber tax.
You have a good point. Any timber on the property when you acquire it is your basis even young timber. So if you have gross 1000 board ft per acre at the beginning and grow it to 2500 bd ft per acre in 15 years, then do a select cut or any cut, the 1st 1000 bd ft per acre is return of principal. Hope that helps.
My best recommendation to anybody buying wooded property is to hire a certified forester consultant to determine the property basis. To go back in time to do this is difficult. By declaring the gross timber harvest and subtracting the property basis will influence the net proceed tax.
The removal of the Forestry tax has indeed come as a tax savings, however, the net difference is the discontinuation of forest related outreach programs.
Without forestry outreach programs, many forest owners take it upon them themselves to determine harvest. If an unscrupulous logger figures out the Woodland owner only wants money, the result can be disastrous and affect the property negatively for decades.
In the end, Forestry assistance programs such as WI Managed Forest Law are needed to help guide. It is unfortunate that many programs get removed or scaled back under the guise of tax break. There are many people sitting in the Assembly and Senate who have no clue about the importance of private forests in WI...no clue whatsoever.
