h appraisals of
future possibilities, and which cannot be paid out of earnings.

Ultimately, a tax must be adjusted to the capacity of the mine to pay
out of its earnings, and this capacity in turn is determined both by the
physical characters of the ore and by the success with which it may be
made available for consumption. This view of valuation for taxing
purposes is sometimes opposed by mining men on the grounds that it taxes
brains, skill, and initiative, and that it puts a premium on shiftless
management. The same argument might be applied to the valuing of any
business or profession. To the writer the argument is not sound, in that
it fails to recognize the element of human energy in resource values. If
value were to be confined solely to the intrinsic character of the ore
itself, there would be required an almost impossible degree of
discrimination on the part of taxing officials to dissociate this value
from other considerations; and there would be required further the
differentiation between efficient and inefficient management, which
involves so many considerations that the conclusion would be worthless.

In the application of income taxes to mining operations, there is
sometimes another tendency toward over-taxation in that the income is
regarded as more or less permanent, and insufficient allowance is made
for exhaustion of the mineral deposit. Under the United States income
tax, mineral deposits are definitely recognized as wasting assets and
this factor is allowed for; but in state income taxes and in England and
other parts of the world, allowances for this purpose are small.

There is wide belief that heavy taxation of mineral resources,
particularly on the _ad valorem_ basis, retards exploration and prevents
the development of the reserves which are necessary to stabilize the
mineral industry. High taxes have undoubtedly had this effect in some
cases, especially where taxes have been imposed on resources long prior
to development; but, in the writer's view, this tendency in general has
not yet passed the danger point, and is not likely to do so until taxes
become positively confiscatory of the industry. To argue that increase
of taxes may even have certain beneficial results on the mineral
industry may lead to suspicion of one's mental soundness; but it is hard
to escape the conclusion that the incidence of high taxes has led to a
much more careful study of the question of reserves, has eliminated in