that about half of the aggregate income is taxed, though this figure of course varies somewhat with the interest rate used.
In the collection of income taxes from coal mines in England, and in the collection of certain state income taxes in the United States, a considerably smaller allowance is made for the retirement of capital value (or for depletion, as this is commonly called). In these cases the deduction allowed is a small fixed percentage of the capital value, regardless of the actual life of the property.
The treatment of mineral resources as wasting assets in the United States income tax law meets one considerable practical difficulty—namely, that the law really requires physical or ad valorem valuation of every mineral property by the government, as a check on the claims for depletion allowance. This immense and expensive task is too much for the tax collection agencies as now organized, and it may be questionable whether it will ever be desirable to expand these agencies to the extent required for such a purpose. This is the principal argument for the use of arbitrary depletion factors such as those sometimes used abroad.
There are many advocates of the straight tonnage tax on mineral deposits, on the ground that it is simple, definite, and easily applied. The present tendency is to extend the application of this form of tax.
It is clear, however, that to assume the same value per ton for taxing purposes on a property making a large profit, and on another property which, because of physical conditions, is barely able to operate at a profit, imposes a relative injustice.
To meet this difficulty, it is sometimes proposed that the tonnage tax should be graded in such a manner as to allow for differences in physical conditions and in profit at different mines.
When one attempts to apply a graded tonnage tax, however, it soon becomes apparent that, in order to make such a valuation equitable as between properties, it is necessary to use all of the factors of the ad valorem method for each of the properties.
The wide appeal of arguments for a flat tonnage tax is based partly on popular misconception of the complexity of elements entering into mineral valuations.