Oregon Forest Industries Council

Tax

Study Finds Tax Burden Greater on Forest Sector Than on Other Oregon Businesses

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[SALEM, April 13, 2021] – The Oregon Forest & Industries Council today released a groundbreaking report from national accounting firm Ernst & Young detailing the total tax burden on the private forest sector in Oregon. Presented to the Government Issues Committee of the Springfield Area Chamber of Commerce this morning, the report’s primary finding concludes the Oregon forest sector pays more than one-and-a-half times more on average than other Oregon businesses.

“By looking at a variety of publicly available tax and economic data sources for fiscal year 2019, we concluded the tax burden on Oregon’s forest industry is greater than other Oregon industries, including the agriculture and manufacturing sectors, and is one-and-a-half times greater than the overall total Oregon business tax burden,” said Caroline Sallee, project lead on the report and Senior Manager with Ernst & Young LLP’s Quantitative Economics and Statistics Group.

Ernst & Young’s report is the first time a comprehensive analysis has looked at the aggregate forest industry tax burden and comes at a time when the Oregon Legislature is considering legislation that would further increase taxes on the sector.

“Our intuition told us this had to be the worst possible time to further increase taxes on businesses, and on the forest sector in particular,” said Todd Payne, Chairman of the Oregon Forest & Industries Council’s Board of Directors and Chief Executive Officer for Seneca Family of Companies. “We’ve just suffered the worst wildfire season in history – private forestland owners lost over 400,000 acres in the Labor Day fires and we are actively working to restore and replant those lands at significant costs. Many of our rural communities are suffering multiple extreme hardships as they struggle to rebuild post-fire while the global pandemic and business shutdowns are taking enormous tolls. This report unequivocally concludes our sector already pays more than its fair share in taxes and it vindicated our sense that additional tax increases are motivated more by philosophical differences about forest management than they are by any sense of tax equity.”

The report calculated the total tax burden by aggregating all taxes paid by the sector, including property taxes, income taxes, small tract forestland taxes, corporate income and excise taxes, fire assessments and privilege taxes. All told, in 2019 the forest sector contributed over $142 million to state tax coffers.

“Given the report’s findings, we now know that legislation under consideration in the 2021 legislative session would effectively double the total taxes currently paid by the forest sector,” said Adrian Miller, Chair of the Oregon Forest & Industries Council’s Tax Committee and Director of Public Affairs for Rayonier. “That would increase the forest sector’s effective aggregate tax rate to nearly three times more than other Oregon businesses pay. At a time when the latest state revenue forecast indicates the Legislature has nearly $800 million more to work with this session than it originally thought and has billions of dollars in reserves, doubling the tax burden on the forest sector seems unnecessary.”

As the number one softwood lumber and plywood producer in the nation, Oregon’s forest sector is one of the state’s cornerstone industries and serves as the economic backbone for many rural counties. Lane County, where the report was unveiled, combined with neighboring Douglas county are often considered the wood basket of the United States as the two counties together encompass over a quarter of the state’s annual timber harvest. Over 80 percent of this timber is harvested from privately owned forestlands.

“When the Chamber was first made aware of this study, we were thrilled at the opportunity to bring the project lead in front of our Government Issues Committee,” said Vonnie Mikkelsen, President and CEO of the Springfield Area Chamber of Commerce. “In Lane County alone, the forest sector provides over 7,000 jobs that pay, on average, 130 percent of the county annual wage. Eighty-five percent of Lane county is forested, and we are home to nearly 30 primary wood products manufacturing facilities. This study is the first time we’ve seen information like this put together and underscores that the health of the forest sector has a direct bearing on our local economies.”

Ernst & Young was commissioned by the Oregon Forest & Industries Council to complete the report at the end of 2020, after reviewing prior work done by the firm. Oregon Business and Industry commissioned Ernst & Young in 2020 to quantify the impact of recently enacted state tax programs on the total tax burden borne by Oregon businesses. That report concluded in the past few years, the Oregon Legislature has increased the tax burden on businesses by 41 percent.

“We never before had reason to commission an exercise like this until we saw legislation introduced that attempted to change the forest tax program in Oregon,” said Miller. “We felt to have a reasonable conversation about that we needed to first establish a baseline for what the sector currently contributes to state taxes. We selected Ernst & Young from among several leading regional and national economics firms largely because of the experience they – and Ms. Sallee, in particular – had in analyzing the impact of diverse state and local taxation programs on businesses, both in Oregon and across the United States.”

To view a recording of the full presentation to the Springfield Area Chamber of Commerce, please click here. To view the full Ernst & Young report, please click here.

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The Oregon Forest & Industries Council is a trade association representing more than 50 Oregon forestland owners and forest products manufacturers. OFIC’s members combine sustainable forest management practices with the latest science and technology to continuously improve the environmental, social and economic value of healthy working forests. We protect and manage more than 5 million acres of Oregon forestlands, employ nearly 60,000 Oregonians, and make Oregon the nation’s largest state producer of softwood and plywood. For more information, go to ofic.com.

Contact: Sara Duncan

Phone: 503-828-2373

Email: sara@ofic.com

Opinion: Tax policy should respect stability of Oregon logging businesses

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By: Todd Payne | The Oregonian | March 10, 2021

Payne is chief executive of Seneca Family of Companies and chairman of the board for the Oregon Forest and Industries Council.

**This opinion originally appeared in The Oregonian.

The March 2 story “Oregon’s logging industry says it can’t afford new taxes” misunderstands the market complexities of our state’s most iconic industry. The severance tax proposed by HB 2379 would not be paid by mills making short-term profits on high lumber prices driven by homeowner remodeling demands during stay-at-home orders. It would be paid by 65,000 private forestland owners in Oregon who collectively just lost over 400,000 acres to wildfires.

I can honestly say this is the worst time to increase taxes on private landowners. According to our calculations, the tax would be an 800% increase in taxes on harvested timber, which is completely untenable. Taxes are permanent. Blips in short run markets are not. Oregonians expect thoughtful policy decisions that respect the stability of family businesses, not attempts to tax them out of existence.

Private forestland owners and manufacturers make Oregon the number one national producer of lumber, and we have more trees today than we did 100 years ago. Seneca is one of Oregon’s oldest, home-grown, family-run forest products companies. We employ 470, manage 170,000 acres in seven counties and operate four sawmills and a co-generation facility that provides clean, renewable energy to 13,000 homes in Eugene. We’ve survived through smart innovation, experienced risk calculations and a grit and endurance that only come from loving what we do.

We are one of few remaining Oregon companies that own forestland and sawmills, giving us expertise on market dynamics between logs and lumber prices. The story focused on lumber prices, but that’s only one part of the equation. Log prices and lumber prices are often disconnected. Because one temporarily goes up does not mean the whole supply chain benefits. More important is long-term stability. Unlike farmers who harvest their crop annually, we invest in cultivating seedlings for 40+ years before we see a return – provided those trees aren’t lost to fire, insects, disease, or ice.

Our industry and its 60,000 Oregon employees depend on the health and vitality of both the mills and the forests that supply them. Unfortunately, the Labor Day fires disrupted that balance, and in the coming years our mills will undeniably face a shortage of timber. In addition to wildfire losses, the state is proposing a 70-year management plan that makes almost 60% of state-owned forests off-limits to harvest. We anticipate upcoming regulatory changeswill further decrease harvest.

Over the last few years, the Oregon Legislature has increased the tax burden on businesses by a whopping 41%, according to a report for Oregon Business and Industry. An additional 800% increase in taxes on harvested timber could make it economically unfeasible to maintain forestland as it would be layered on top of existing property taxes, income taxes, payroll taxes, the new Corporate Activity Tax, plus assessments for fire suppression.

Today, timber is correctly taxed as a crop, but forests are more than just crops – they provide many environmental and social benefits. That’s why our tax and land use systems work together to prevent incentives to convert forestland to other uses. While trees grow, they provide water filtration, air purification, carbon capture and storage, wildlife habitat, and recreation. When trees are harvested, they create family-wage jobs and the only reliable, renewable source of carbon-neutral building materials.

Our Legislature should help businesses struggling through the pandemic, not increase their taxes. We should focus on restoring hundreds of thousands of acres of burned forests back to healthy, thriving forests that are less likely to burn – not taxing the people doing that work.

Opinion: Timber, environmental interests’ collaborative problem-solving deserves Oregonians’ support

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By: Arnie Roblan and Caddy McKeown | The Oregonian | Feb. 7, 2021

Roblan, a Democrat from Coos Bay, represented District 5 in the Oregon Senate from 2013 until last month. McKeown, a Democrat from Coos Bay, represented District 9 in the Oregon House from 2013 until last month.

This opinion originally appeared in The Oregonian.

Oregonians are well-versed in the story of our state’s decades-old battle between the timber industry and environmentalists. Books have been written about it. University seminars are given on it. As longtime legislators, we had front-row seats to years of tense hearings with heated testimony on controversial forest policy bills. These issues are extremely emotional and divisive, sometimes fueling opposition in the form of tree sitting, massive rallies on the Capitol steps and other public protests.

We are encouraged and optimistic that those days are behind us. As Henry Ford once said, “Coming together is a beginning, staying together is progress, and working together is success.”

Last February, Oregon Gov. Kate Brown announced a groundbreaking agreement between 13 timber and forest products entities and 13 environmental organizations. Known as the Private Forest Accord, this collaborative environmental effort is moving forward in lieu of the divisive ballot measures, litigation and contentiouslegislation of the past. The signatories of the accord pledged to work together on proactive legislation and explore if common ground exists to support recommended changes to forest practices that have long divided them.

Even during a global pandemic and a horrific wildfire season, the group has stuck together and made significant progress. During a special session in June, the Legislature passed Senate Bill 1602 with nearly unanimous bipartisan support in both legislative chambers, and the bill was signed into law by the governor in July. SB 1602, which was crafted with the help of timber and environmental leaders, codified the historic agreement and created a set of significant reforms to the Forest Practices Act. These new laws restrict helicopter applications of pesticides on forestland with new protections for homes, schools and drinking water, and created a new, first-in-the-nation real-time neighbor notification and reporting requirement. We are proud to have championed that bill. All Oregonians should be proud of this accomplishment and the admirable spirit of collaboration that made it possible.

Now is the time to build on that success. Last month Gov. Brown announced the appointment of experienced mediator Peter Koehler, Jr., to facilitate further dialogue about new protections for sensitive aquatic species on private forestland, which could be formalized in a statewide Habitat Conservation Plan. Negotiations began in earnest this month, and we have high hopes for the outcome.

These negotiations over the next few months will not be easy, but the success of SB 1602 demonstrates the promise of a thoughtful, collaborative process for change that Oregonians deserve, rather than the divisive battles of the past.

Importantly, the Legislature needs to support this momentous opportunity and give the signatories the space necessary to grow and carry out what was set in motion last February. It is time to hold off on legislation that fuels a polarizing debate over Oregon forest policy, and instead support the arena for collaborative compromise. Legislative leaders from both parties should endorse this effort and help ensure its success by tabling traditionally polarizing issues and debates.

While we do believe it is imperative the Legislature address the recent megafires in our forests that have devastated our communities, solutions should focus on federal lands and can be discussed without disrupting the Private Forest Accord. In the past decade, 86% of the forested acres that have burned in Oregon were on federal lands.

The opportunity for a better way and a new day for Oregon forest policy is before us. A new paradigm—something we’ve never seen before in our careers as legislators—is taking shape, and it deserves every chance to succeed.

The Legislature and all Oregonians should join us in embracing this new collaborative approach.

Timber strongly supports rural counties

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OFIC’s members understand better than most the economic devastation that resulted from lawsuits a generation ago that shut down most of the local timber economy. Lost jobs. Poverty. Inadequate revenue for schools, hospitals, libraries and public safety. The counties where our members operate survived a 90% reduction in federal timber harvests – but our communities, our people and our families have never been the same.

It is from this lived experienced that we disagree with the premise of the recent story “Big Money Bought Oregon’s Forests” by Rob Davis and Tony Schick. These urban reporters and their sensationalized reporting fail to understand rural Oregon as we know it and are living it. Further, their reporting also fails to recognize or even mention dramatic changes in state tax policy – resulting from two voter-approved ballot initiatives – that fundamentally changed Oregon’s property tax systems for all property owners.

Any thoughtful discussion – or reporting – about how Oregon taxes forestlands must also look at how Ballot Measure 5, approved by voters in 1990 and Ballot Measure 50, approved by voters in 1997, dramatically altered Oregon’s property tax system and its unintended consequences for rural counties. These were policy decisions made by Oregon voters – not timber companies. Yet, remarkably, there is no mention of these measures in the four thousand word story.

In addition to paying personal income tax and corporate income and excise tax, just like other corporate entities in the state, forest landowners also pay property taxes and are treated exactly the same as all other landowners in the state. Their property is taxed at fair market value in its use as timberland – the price a knowledgeable purchaser would pay for land primarily use to grown and harvest timber. This approach prevents conversion of forestland to other uses and preserves working lands, just like with agriculture lands and open spaces. It’s effective: Oregon has maintained more forestland acres since 1900 than our West Coast neighbors.

Following passage of Ballot Measures 5 and 50, the legislature and then Governor John Kitzhaber went to work to fashion a new timber tax policy that was both constitutional and fair.  In addition to addressing the new voter-approved property tax constraints, they also considered the fact that severance taxes are generally paid on non-renewable resources like oil, minerals and coal that are extracted and not replaced. Trees, on the other hand, are a renewable resource – with four trees planted in Oregon for every one that is harvested. You can’t replant coal – but we do replant trees. Lots of them.  Governor Kitzhaber and overwhelming bipartisan majorities in the legislature agreed and approved a modern, fair and constitutional system for taxing forestlands. A system designed to support jobs but that also recognized that private forests also provide unique public benefits: clean air and water, wildlife habitat, recreation opportunities, beautiful scenery that draws tourists to our communities, carbon storage, and a source of more green, renewable building materials than any other state in the nation.

We understand that a story about big timber companies hurting small rural communities is easier to tell and more likely to generate social media clicks and likes than the ins and outs of complex state tax policy. But that doesn’t mean the story is accurate, relevant or complete.

The jobs and tax revenue generated from timber and forest products remain essential to Oregon’s economy – especially in rural areas. In fact, private timber companies provide some of the highest-paying jobs in many rural counties. In Douglas County almost a quarter of all jobs come from the forest sector. In some counties, like Clatsop, these jobs can pay twice the state average annual wage. In all, the forest sector employs more than 60,000 Oregonians to the tune of $3 billion in annual payroll, in mostly rural counties.

The real story about rural communities is that despite all that is thrown at us – from wildfires, to economic devastation from COVID-19 to policy decisions made by rural elites who don’t understand or appreciate our way of life – we remain resilient and hopeful. Our communities are tough and independent. And our people love the forests for all that they do and all that they mean for Oregon – jobs, recreation, wildlife and beauty.

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