Show ECONOMIC POSITION OF UTAH METAL MINING summary of argument presented regarding mine tax legislation by A G mackenzie A statement made before the revenue and taxation committee of the house of representatives utah state legislature february 25 1929 by A G mackenzie secretary utah chapter american mining congress in opposition to house bill 71 which proposed to double the rate of taxation of metal mine net proceeds the committee reported adversely on the bill and it was subsequently withdrawn march 1 by its author representative S M jorgensen of sevier county such a statement based entirely upon facts and so comprehensively compiled by mr mackenzie whose knowledge of the subject can not be disputed will serve as a never ending source of information and data on this vitally important subject of mine taxation 1 and should be preserved for reference ephe HE considerations INVOLVED in the pro T posed increase of metal mine taxes in utah go far beyond the effect such action would have on the industry itself they are of concern to the state genera generally lly as will be pointed out later herein E it will also be pointed out why it is necessary not 0 only to enlist capital initials initia initially ll y in in a mining enterprise but to induce it to keep on investing so IRVI that the enterprise may continue its operations with knowledge of the A G mackenzie of investors to seek the most ost favored field and of the fact that there are many inviting fields for mining investment outside utah and out side de the united states it is appropriate to review briefly the e recent legislative history of utah on this question six of the last eight sessions of the utah legislature have considered measures designed to increase mine taxes A constitutional amendment was submitted by the legis lature ture of 1915 and defeated by the people in 1916 anther another the legislature of 1917 amendment was submitted by and d approved by the people in 1918 the legislature which of 1917 19 occupation tax on mines also passed a special remained bained in effect until 1919 the legislature of 1919 enacted the present mine tax t in 1918 law w in accordance with the amendment adopted which was formally commended by that legislature and the governor through adoption of a legislative resolution S C R no 7 approved march 19 1919 as having restored amicable relations among the interests most vitally concerned and made possible the adjustment of taxation on a basis equitable to all the people of the state this came after the question had been thoroughly considered for several years and it was understood the adjustment meant that the mines should have a period of governmental ern mental stability and freedom from agitation and attack but they have not the pending bill is the third attempt in the last six years to increase the mine taxes mines taxed in accordance with law other property not there are continual assertions that the mines are evading taxation the indisputable facts are that the mines have been taxed strictly in accordance with the law ever since it was passed and that the law has been constantly evaded and violated in connection with the taxation of other property sustained efforts ha have ve been beai 1 made to create an unjustified J u stifled prejudice against the industry the mining people have been depicted as predatory i interlopers interlope rs and have been singled out as the logical inheritors of the burdens misfortunes and mistakes of others regardless of the fact that the mines are in no way responsible for them these facts are well known in utah and are be becoming cornin those that invest and known elsewhere especially among direct investments the state is acquiring a reputation as a place of constant adverse agitation against the mining industry relation between state and the industry of the industry consists the states official recognition of taxing it and inspecting it there is no state officer charged with the advancement or state organization this is not and countries of mining as in other states but merely to indicate the situation mentioned as a complaint complain ty as a whole the industry has not sought public aid subsidy or relief and has become thoroughly accustomed to working out its own problems the mining people have assume assumed d that their presence ble they believe their ac desira desirable here are activity a and nd have established their right to continue under conditions that will permit an adequate reward for their enterprise and labor and that will afford them an opportunity to compete on comparable terms with mining operations elsewhere if these considerations be denied those unable to withstand the new conditions must seek other employment or other fields such a consequence is not at all desired by the mining people almost all of them investors and operatives alike are here by preference and hope they can remain in the industry and remain here I 1 under our present plan of taxation the state shares very substantially in the prosperity of a mining operation and does not participate fully in its adversity it is therefore curious to note that some of the enthusiastic assailants of the mines point to mine earnings as the commission of something reprehensible against the state and ignore the fact that every dollar of net proceeds is multiplied three times in the computation of that mines contribution to the state in the form of taxes previous and present basis of mine taxation metal mines of utah were assessed from the admission of the state until 1919 on the following basis on surface ground at the price paid the government except when used for other than mining purposes in which case the surface was assessed additionally in accordance with such other use on machinery and improvements prove ments at their full value and in the case of productive mines on oil their net annual proceeds the law was changed in 1919 so as to provide that productive mines should be assessed at a valuation obtained by adding three times their net proceeds to the valuation of their surface ground machinery and improvements instead of adding the actual net proceeds the definition of net proceeds was also modified under the present law the metal mine tax of utah is higher than that of any other western state except arizona utah mines would pay less in montana less in idaho or colorado and less in nevada they would pay more in arizona where the tax burden on the mines is notoriously excessive the ores much richer and the operations much more extensive than in utah metal mine tax law provisions elucidated utah metal mines are required by law to file annually with the state board of equalization under oath a detailed statement of their operations for the next preceding year the information thus furnished includes an itemization of the nia machinery chinery equipment and supplies the number of tons of ore mined their metallic contents the total amount of money received for the ore the cost of extraction transportation reduction and treatment of the ores and the cost of construction in the taxable year from these data the net yield is determined multiplied by three and added to the valuation of the surface ground machinery and equipment the total thus obtained becomes the assessed valuation of the property and is subject to all the levies imposed in the jurisdiction where the mine is situated in the computation of net proceeds no allowance is permitted for depletion exhaustion of the ore in the mine nor for depreciation except that the mine is permitted to deduct the cost of construction done and equipment purchased in the taxable year but not thereafter net proceeds is defined in considerable detail in the law the deductions permitted do not include and have never included all the expense of the mine and important deductions once permitted are now excluded in consequence of a recent court decree As net proceeds is expressed in specific terms of money it is not and has never been assessed at less than its actual amount or per cent difference in net proceeds and net profits net proceeds should not be confused with net profits the net profits as well as the return of his investment to the mine owner are contained in the dividends of the property several mines of the state have been assessed in substantial amounts on net proceeds for considerable periods without having earned anything for their owners comparison of the net proceeds records of the state board of equalization with the dividends paid in the same period discloses that the assessment of net proceeds averages more than four times the dividends when the valuation 4 of surface ground machinery etc of the net proceeds companies is added to the valuation of net proceeds the total assessed valuation becomes about five and one quarter times the amount of the dividends the valuation of surface ground md machinery chinery etc is equivalent to about one fourth of the total valuation of the net proceeds payers and is of course assessed each year whether the mine is productive of net nef proceeds or not the records of the state board of equalization show that the average yield of the net proceeds mines of the state in the last nine years has been a ton out of this the mine owner must obtain his dividends if any the return of his investment and pay his federal taxes and other items of cost not deductible under the utah mine tax law the discrimination against mining at the time the present utah mine tax law was passed it was proposed to assess all other property at its full value and thus endeavor to maintain the comparative relationship lation ship that had previously existed between metal mines and other property this proposal amounted to a promise on the part of leading proponents of the new mine tax law without any implication of bad faith and without assertion that many of the tax officials did not conscientiously endeavor to bring other property to full valuation and maintain it there the fact is that other property is not assessed at its full value today it has recently been officially announced that other property in a leading county is assessed at about 67 per cent of its actual value and that this county has the highest valuations in the state if 67 per cent were the average of the highest valuation instead of other property the net proceeds multiple is now equivalent to instead of 3 or about 50 per cent greater than was contemplated when the law lav was vas passed so that mine proceeds was assessed at least more in 1928 than it would have been on oil a basis comparable with the assessment of other property this makes the mine tax burdensome when compared with other property as in addition to the ri rigorous orous as assessment sess mining property is subject to the same levies as other property assessed valuation of net proceeds of mines the assessment of net proceeds in 1928 shows an increase of while the valuation of other property shows a decrease of compared with 1920 the increase in assessment of net proceeds was per cent although the increase in the gross value of the output of the net proceeds taxpayers was only per cent all mining property shows an all increase of per cent while all other property shows a decrease of per cent despite the accretions in value that might inight be expected in consequence of normal growth metal mines were assessed in 1928 at which is per cent of the total assessed valuation of the state there were mines assessed by the state board of equalization in that year of these 20 showed net annual proceeds on which they were assessed at in view of the statement often and incorrectly made that the mines pay only on their net income it is interesting to point out that the records of the state board of equalization show net proceeds alone were assessed at more than the total gross value of the product of these mines in 1928 and that they were also assessed at on improvements and machinery and at on their mining claims another fact in this connection is that the assessment of net proceeds for 1928 was times the amount of metal mine dividends in the corresponding year the dividends which amounted to include return of capital as well as income from it as pointed out elsewhere tax discussions usually bring forth assertions that one or another sort of property is not bearing its proper share of the tax burden complete data for purposes of comparison are not available in this state mines are seldom sold outright for cash in utah but one such sale made recently is significant in connection with the usual definition of fair taxable valuation as being the amount of money that property would bring at a solvent sale in this instance a producing mine in solvent condition was sold for cash and brought 30 per cent less than its assessed for that year importance of industry to state stat e welfare shown mine dividends and ignore many persons consider only of the other important facts of the industry the report industrial commission of utah recently issued shows that I 1 for the year ended june 30 1928 the metal mining industry of utah employed men inen who were paid in wages which is equivalent to a month in payroll alone this money is all expended in the state and in addition to this the mines annually spend millions of dollars in utah for supplies and services used in company operations besides the men directly affected about 60 per cent of the men employed in the railway freight service are engaged in the transportation of metal mine products and others affected include merchants farmers in fact practically every line of business in the state several populous communities depend entirely upon the metal mining industry the mines are now paying the same high wages that they paid in war time and in some instances the present wages are the highest in the history of the state A 10 per cent reduction in the metal mine payroll would mean a loss to the laboring men of about a year that is now being spent in the state an unfortunate fact in connection with the metal mining 6 situation is that the payroll is about the only cost factor over which the metal mine operators have any control As is pointed out elsewhere they have no control over markets costs of supplies or other expense items the mine operators have endeavored sincerely and persistently to evolve a method whereby increased expenses or diminished market prices could be absorbed without adverse effect on the employees but have had small success the personnel of the utah metal mine employees is of an exceptionally high average A large proportion of them are married men home owners and 6 good substantial citizens in addition to the continuous employment these mines afford to so many men they also furnish employment to many others in the state not continuously engaged in mining who find seasonal employment in the mines between crop seasons on the farms and when other employment is not available A short statement of the nonferrous non ferrous metal market situation is desirable in this connection important place as metal producer principal metals thus far developed are silver copper lead and zinc it leads the states in the production of silver is second in copper third in lead and fourth in zinc these metals occur together in the same ore and must be mined and treated together although they are sold separately and at prices that fluctuate without reference to each other utah metal mines sell their ore to the local smelters shelters sm elters and have nothing to do with the smelting smelling sm elting refining or sale of the metals 1 although all the costs of transportation smelting smelling sm elting refining and marketing are deducted from the price paid to the mine owner for his ore the mine owner bears all the costs from the mining of the ore to the sale of the finished metal product the principal world use of silver is for coinage and the settlement of trade balances other uses are by jewelers |