Forest quality, government revenue constraints, and the second-best efficiency of regressive forest taxes

We identify conditions under which a regressive forest productivity tax is preferred to a progressive one. We use an optimal taxation model where the government faces a revenue constraint that must be met through its choice of taxes. Forest land is also assumed to vary in quality. Under some conditions, the government should lower tax rates on high-quality land relative to low-quality land. This is more likely when the highest quality land is owned by the poorer landowners. In this case the revenue-constrained government will subsidize the highest value land to increase revenue collections.