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Show i Metalliferous Mine Taxation 1 . - , i Interpose t no net proceeds scheme? 1 1 would be far safer and simpler to apply t J jo process direct to the ascertainment of the value of the mine (instead of the' proper multiple) in the usual manner of property assessments, (subject to competent com-petent review. 12 Much stress Is laid by the advocates of the amendment upon the fact that other states have used the uniform multiple mul-tiple system, although each state has used a different uniform multiple: The obvious objection to tills as evidence of worthiness is: Net proceeds are always net proceeds wherever they are. Given the same basis for the calculation, 'only one of the several uniform multiples chosen by the states can he right, the others must bo wron?. But the conclusive con-clusive answer is : JF the principle is wrong in itself, Its employment by any number of states does not make it right. 13 If the people of Utah wish to discard dis-card the equitable theory upon which the net proceeds tax is based, they should aboliBh it altogether from their state constitution. The foregoing analysis of the situation logically suggests: (a) That they should first vote down the proposed amendment. (b) That the next legislature should take up this question in a judicial temper tem-per without undue haste, and. applying scientific prtciples to the intricacies of the problem, devise some plan of taxation taxa-tion that would permit each mine to be assessed upon its own merits, according to the conditions and equities pertaining to each. (c) Then amend the constitution as may be necessary to put that plan Into effect, but without depriving the legislature legisla-ture of its accustomed legal powers. By C. L. ROOD. Asiiio from the discussion of Its legal fcspaota, comment upon the proposed njnndment to the constitution In regard lo the taxation of metalliferous mines has not lirouRht out some of the essential basic facts. In the following discussion. 1 specifically specifi-cally exclude from the propositions laid down the property of the Utah Copper Mining company, although some of them would apply equally to that property. For well known reasons, the Utah Copper mine stands in a class by itself in this stale. Its phenomenal record, due to extraordinary mlneralogical conditions, is In a largo sense being made the basis for an attack upon our mining industry. The mass of large figures quoted by 'the defenders de-fenders of the amendment is made up in the main by the results of that company's com-pany's operations, which are not applicable ap-plicable to metalliferous mines in general. It does not speak well for the fairness of, persons who are educating our youth that they continually ignore or evade this fact. Neither Is it Just that'the mining industry as a whole should be made a vicarious sufferer because of the prosperity pros-perity of one particular company. For the lack of space 1 shall he able onlv to outline out-line the basic facts above alluded to. Unlike Other Industries. 1 Mining Is almost entirely unlike any other industry. (a) The total quantity of mineral deposits de-posits is uncertain. (b) The value of the minerals fluctuates fluctu-ates widely. (c) The costs of extraction and reduction reduc-tion are very unstable. (d) It Is impossible to foretell their actual ultimate value. Ce) It is difficult, at any given moment, mo-ment, to determine their prosent value. (f) When undertaken, the effort Involves In-volves extraordinary expense. (g) Mining usually demands dead expense ex-pense for equipment, which is mostlv valueless when the property Is exhausted. (h) Also Involves a capital investment for underground development which is entirely en-tirely lost unless the mine pays. (1) Each ton of ore mined subtracts its value from the total value. (J) Not one mine in a hundred avoids the common fate: Total failure. 2 Each specification above differentiates differenti-ates mines from other kinds of property wherein the quantity, quality, cost, annual annu-al profits, capital employed, etc., are readily obtained with substantial accuracy. ac-curacy. With these factors known, an as-seesor as-seesor of ordinary intelligence can find the assessable value of such property according ac-cording to uniform rules and those tests revealed by business experience; whereas, directly the opposite Is true in the case of mines. Not only that, hut the net income in-come from every other business leaves the property and capital Intact, while the net income from a mine Is partly, If not wholly, a return of capital. 3 The justification for the net proceeds method depends entirely upon the foregoing fore-going considerations. It was never intended in-tended to extend this method, nor can it be defended, as a mere favor to a privileged class. It might, however, act as an encouragement s to engage in an extra hazardous business, not for the selfish benefit of the miner, but for the welfare of society. Theory of Tax. S The general theory of the present net proceeds tax (as I have always understood un-derstood it), Is as follows: (a) The total value of any mine is the total value of all Its mineral deposits that, being in the mine, shall be ultimately extracted. fb) Each year, through a term of years until exhausted, the mine produces a part of this total value. (c) If a tax be paid each year upon that part produced in that year, when the mine is exhausted the government will have been paid taxes finally on all the mineral values originally in the mine. It was considered that this theory would work out equitably, because if a mine did not pay, it . had no taxable value: and because, In the long run covering the average of all mining operations, society would get its fair toll in taxes. This seemed probable, keeping in view the common com-mon experience that many a mine yields net proceeds for a short period, and yet concludes operations with a net loss. 5 If the above theoretical conclusion be sound, then the proponents of the amendment have reversed the facts as to the present Inequality of mine taxation as compared with other taxation, thus: (a) Assuming that the mining industry, during the long period prior to 1015, wsis upon the whole paying taxes upon a basis which gave its total value, then it was paying throughout that period three times what was equitable, since all other property prop-erty was being assessed at one-third Its value; (b) In this view of the case, the amendment now proposes to restore the former inequality as against the mining industry, according to a definite purpose already Indicated in tlte imposition of an occupation tax not levied against other forms of property. (J It has been impossible to decide from the language of the amendment proposed, whether the multiple is to be selected by the legislature, in which event It must be absolute and unHform: or by the state board of equalization, in which event the multiple (Or submultiple) might he varied, var-ied, perhaps, as against each property assessed. as-sessed. Some defenders of the amendment amend-ment assume the former and some assert the latter. Let us see how each selection selec-tion would work in practice. Bear No Ratio. 7 Whatever may be the truth as to the fairness of the net proceeds method as applied to the whole mining industry, it is certain that the net proceeds of any one mine for any one year bear no fixed and permanent ratio to its total value. 8 This being incontestably true, any calculation based exclusively upon net proceeds must be based upon error. Assuming As-suming that tho uniform multiple selected should be 3. we would get an equation something like this; Error x 3 Truth. It would be highly edifying to listen to our educators expounding the beauties of this equation to their classes in mathematics. mathe-matics. 9 Thus, where a uniform multiple is used, we have a false basis merely magnified. mag-nified. This would result in utter injustice, in-justice, in some cases to the mine owner because his tax would be too1 high, and In other cases to the state wherein it would be too low. It may be urged that the present basis presents this Inequality Inequal-ity as between differing minds. That is true. But to correct an inequality, it does not seem to be quite the proper remedy to adopt a plan that may multiply multi-ply It. Also, the value of a mine is steadily stead-ily being reduced by the amount of Its annual net proceeds, and this extinction of value cannot be allowed for when a uniform multiple Is used. 10 On the other hand, if a different multiple (or submultiple) be selected and applied in each case by the board of equalization to differing properties, then the determination evidently must be based on factors other than the net proceeds. How would it be made? (pi) Either by personal whim, favoritism, favorit-ism, zeal to raise large public funds, personal per-sonal financial reasons or political advantage?; ad-vantage?; (b) Or by having such an examination examina-tion of each mine made by competent experts as would give the most reliable data obtainable. This would include examination ex-amination of titles, apex rights, extent of ground and the position of veins within with-in It, information and experience from neighboring properties, the geological features, fea-tures, the extent of the development, an estimate of tho ore reasonably "in sight." an estimate as to future costs and metal prices, and an allowance for probabilities based on thn foregoing considerations. Difficulty in "Way. 11 I am not disposed to assume that the board's discretion would be abused In unworthy discrlml na tfon, hut that they would act upon the ascertained facts and estimates. Jf so. the employment of a varying multiple I or submultiple) will necessitate that very unsatisfactory and costly process of examination and investigation, inves-tigation, to avoid Which the net proceeds method was devised. If this process has to be gone through with just as it would be without a net proceeds scheme at all, then the question naturally arises, Why |
