254 NATURE OF CAPITAL AND INCOME [Crar. XIV

disturb them greatly. The effect of such a tax as was
illustrated in the example of the three brothers would be to
discourage the uses of capital which involve waiting. In
fact, this discouraging effect is well recognized and applauded
 by the single-tax advocates, although they overlook
 the inequities involved. According to them, it is
right to discourage waiting, and no speculation in real estate
such as was described in a previous chapter should be permitted.
 They would tax all increase of value of land in the
manner just described. Perhaps the most harmful case of
such a system of taxation is that of forest land. Forestry
advocates have long been aware of the baleful effect of the
taxation of growing forests, producing, as it does, wasteful
and premature cutting, and have attempted to secure a
reduction or remission of such taxes. But the persistent
belief that the annual increment of value of such forests is
income and should be taxed has hitherto prevailed in
America, with the natural consequence that the owners of
these forests have cut them when they should have allowed
them to grow. In Europe, a longer experience in forestry
has led, in some cases, to a more rational system. Baden
exempts newly established forests from tax for twenty
years (law of 1886). In Austria they are exempt for
twenty-five years (law of 1869). In France three-fourths
of the land tax is remitted for thirty years.”' Even a
small tax, when laid on forest land which will yield no
timber for fifty years, becomes a very serious drain in the

long run.’
§ 14

The fallacy which has been exposed is not only a confusion
 between realized and earned income; it is also a
confusion between income and capital. To regard “sav-14

 How shall Forests be Taxed?” by Alfred Gaskill, Forestry and
Irrigation, April, 1906, p. 173.
2 Some limitations on the applications of a theoretically correct income
 tax are mentioned in the Appendix to Chap. XIV, § 3.