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Show But, other devices, such as tax credits, have also been proposed. None of them is designed, however, to compensate for the fiscal burdens generated by the presence of Federal lands. In the Commission's opinion, this is not a public land problem. But, close consideration must be given to the relationship of primary and secondary highway sliding-scale benefits to land-related payments. A Tax Effort Criterion To the extent that state and local tax efforts jail below the national average, the Commission recommends that payments in lieu of taxes should be reduced proportionately. In addition to the public benefits deduction from estimated full tax equivalency as the basis for Federal payments, a further deduction based on a tax effort criterion should be applied to assure that the cost of state and local government is not shifted disproportionately to the Federal taxpayer. The Commission recommends the use of a criterion based on per capita state and local taxes from all sources as a percentage of state per capita personal income for each state, compared to the national average of per capita state and local taxes from all sources as a percentage of national per capita personal income. Possessory Interest Taxation State and local governments should be encouraged to tax possessory interests of Federal land users, such as lessees and remittees, and the improvements constructed by them. This will, obviously, have an impact on the overall tax effort. At present, the contractor report referred to earlier makes clear that there is considerable variation in the treatment of possessory interests among the states. The Commission believes that possessory interest taxation would afford state and local governments a significant opportunity to supplement conventional property tax income. At the same time, the Commission recognizes that with the many taxing devices available to it, an individual state might score well overall, as compared with other states and still not pursue possessory taxation as vigorously as some of the others do. Sliding-Scale Highway Benefits Programs // the Commission's recommendation for the establishment of a payments-in-lieu-of-taxes system is adopted, the sliding-scale highway benefits program should be re-evaluated. Under the interstate, primary, and secondary road network programs, public landholdings of the Federal Government, excluding national forests, parks, and monuments, determine the amount of matching funds required of a state as against the Federal funds for those programs. 240 The Valuation of Federal Lands The Commission recommends that the interests of all concerned should be protected by a continuing program of periodic valuation of Federal lands. In the interest of administrative simplicity and uniformity, the implementation of a Federal payments-in-lieu-of-taxes system will require a systematic approach to the valuation of Federal lands. Federal lands would have to be valued expressly for tax purposes, with built-in protection against discriminatory practices. As a first requirement, the General Services Administration should be given responsibility for overall administration. At the operational level, representatives of the Federal Government, jointly with state and/or local governments, should agree on a valuation for tax purposes consistent with the assessment of privately owned lands in the area. Safeguards must then be provided to assure that, in relating payments to the tax rates applicable to similar private land, there will be no discrimination against the Federal Government. A system of placing valuations on Federal lands for this purpose need not be burdensome, either administratively or financially. The appraisers used could be either Government employees or individuals retained under contract, though the Commission prefers the latter. A different method, used in the valuation procedure for the revested Coos Bay-Wagon Road grant lands in Oregon, might also be followed. A Federal representative, a local representative, and a disinterested third party compose a 3-member board that establishes the valuation. Still another alternative would be to use a board of appeals, rather than a disinterested third party, to reconcile differences between the Federal and local representatives. Since we are committed to the idea that the United States, as the Sovereign, must have the last word, this last solution may offer the most promise. Valuations would be made every 5 to 10 years but would be updated annually by methods to be established by those making the initial valuation. Improvements Valuation for determining payments in lieu of taxes should not include improvements on Federal lands. If improvements on Federal lands (summer homes in national forests, concessionaire facilities |