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 some cases the expenditure of money for development of excessive reserves to be used far in the future, and has tended to prevent over-production.
Where mineral reserves are developed too far ahead of demand, the interest on the investment piles up an economic loss to be charged against the industry. It may be assumed that the urge for exploration will continue as long as there is demand for mineral resources; and that, to keep the industry on a sound basis, a certain amount should be set aside and charged to cost for the purpose of keeping up reserves in a proper ratio to production. Much remains to be learned about the most desirable ratio between reserves and production. In many camps, before the incidence of high taxes, this ratio was not properly determined; and there was a tendency, due to natural acquisitiveness and in the absence of anything to hinder it, to build up reserves indefinitely. The first effect of high taxes in such camps has frequently been the curtailment of exploration and development. Later, as production has begun to approach the end of the reserves, exploration has been resumed, but only on a scale necessary to insure production for a limited period in advance.
The argument that high taxes inhibit exploration is good only beyond the point where the industry itself becomes no longer profitable. If there is sufficient demand for the resource, it is obvious that such a condition cannot long continue; for, as production and the development of reserves fall off, the resulting increase in the price received for the product is likely to offset any effect of taxes, and to restimulate production and exploration.
Nevertheless, in this period of high taxes following the war, there is much discouragement in the matter of exploration, suggesting that the danger point is being approached. Some relief has been afforded by recent special provisions of the federal income tax law, recognizing mineral resources as wasting assets, allowing recent discoveries to be included with total assets for depletion purposes, and recognizing special and peculiar circumstances with reference to each mine. Also a certain amount of exploration goes on through the momentum gained from past conditions, without sufficiently full recognition of the effect of present high taxes. This is not surprising when it is remembered that the people actively engaged in field exploration often do not think sufficiently fully of the tax situation, until after a discovery or development has brought them face to face with it.
Because of the vital importance of the reserve factor in mineral valuation, geologic aid and advice are extensively sought by both public and private organizations. Mining geologists are playing an important part in the application of the national income tax. A larger number are acting for private companies in appraisals required by this tax. Many geologists are used in making valuations for state taxes, and in two cases the state geological surveys have complete charge of appraisals. These appraisals include not only examinations of specific properties, but general surveys of large regions, to ascertain possible values of undeveloped lands and to establish broad principles of valuation based on a consideration of all the physical factors in the situation.