Forest valuation under the generalized Faustmann formula with taxation

This article presents the second part of a two-part series on forest taxation and valuation. In this second part, I derive the forest valuation formulas under the generalized Faustmann formula with five types of forest property tax. They are the unmodified property tax, the site value tax, the flat property tax, as well as the gross and net forest productivity taxes. Under the assumption of backward tax shifting, all of the taxes result in lower land expectation values. If the tax does not affect the optimal harvest age empirically, then the value of the standing timber remains the same with or without taxation. When a forest property tax, such as an unmodified property tax, shortens the optimal harvest age, it will also affect the value of the standing timber.