amounting to, say, $40,000, upon which his taxes, after deducting the $10,000 exemption, would amount to $60, against the professional man's total exemption.

Our gross sales law levies taxes for several privileges, namely, (1) on production, at the rate of two-fifth of one per cent; (2) on manufacture, at the rate of one-fifth of one per cent; (3) for the privilege of selling property, real and personal, whether farms, merchandise, or capital assets, the tax applying in all cases (except in the case of a wholesaler or jobber) on the gross sales, at the rate of one-fifth of one per cent; and in the case of a wholesaler or jobber, on the gross profits (gross sales less cost of goods purchased) at the rate of one-third of one per cent; (4) on banks and public utilities, one-fifth of one per cent on the gross income derived from intrastate business only; (5) on professions, one-fifth of one per cent on the income derived therefrom, and (6) on any other gainful business not above provided for, one-fifth of one per cent on gross income.

The specific exemption of $10,000 annually, as I have interpreted the law, may be deducted from the amount of gross sales, gross profits or gross income on which the tax for the exercise of the particular privilege is based; so that a taxpayer, if his business activities fall under two or more sections of the law, may deduct two or more exemptions. For instance, coal companies are entitled under the present act to three exemptions. Manufacturers get two or more exemptions. Small business handling tangible property and also selling services, such as garages, claim two exemptions. The small merchant, however, whose business does not warrant the payment of a tax, and to whom the exemption clauses of the act are peculiarly applicable, is not affected by this change, as he receives but one exemption in any case. The exemption of $10,000 is too high. Five thousand dollars, it seems to me, would be liberal. I have in mind the recommendation to the legislature that the exemption for any taxpayer be $10, deducted from the total taxes; but it will be for the legal minds to determine whether, under our constitution, in the case of privilege taxes, one exemption to apply against the taxes due on account of the exercise of several privileges will be sufficient.

In the working of the West Virginia gross sales tax, as applied to sales of tangible property which consist of real estate transactions, there seems to be room for considerable simplification in the method of applying the tax. Real estate sales may be divided into two branches, consisting of (1) sales made in the usual course of business by a recognized real estate dealer and (2) casual sales of real estate. It is probable that 80% or 90% of all real estate sales made in any county of the state consists of casual sales of real estate by home owners, and these real estate transactions are

distributed among practically the whole body of the citizens of the community. Owing to the fact that an exemption of $10,000 is granted under the law, the great majority of real estate sales of a casual nature escape the tax, if not completely, at least to a degree that leaves the actual tax collection an inconsiderable amount. It is found that the great bulk of taxes collected on account of transfers of real estate will come from comparatively few persons in each county. The tax for the most part will consist of (1) very large real estate transactions of a casual nature, and (2) a great many transactions of real estate made by persons engaged in the real estate business.

In conclusion, gentlemen of the association, permit me to state in frankness that the sales tax in West Virginia was not enacted into law except after a prolonged and bitter fight which was characterized in the ultimate end by compromises and concessions by its advocates. We have tried to make of it a tax that will be relatively free from distasteful inquisitorial features and large expense of administration. As a result, there have been many converts to the equity and justice of it - many who before regarded it as a vicious departure. I think I speak the sentiment of the state when I say that it is more acceptable than any other form of indirect taxation now in effect in any state. Consequently, instead of any step in the direction of its repeal, I expect to see the next legislature deal with it exclusively in the way of strengthening it and making it a permanent source of state revenue. Like any other new tax legislation, there is need for substantial amendment and revision, but the principle, I am sure, we have established definitely.

I hope that in its wisdom the executive committee of this association will determine that the next year's conference shall be held at our famous White Sulphur Springs and that from that viewpoint you may have opportunity to see and judge for your respective selves what progress we have made in our taxation program.

MR. HALLANAN (continuing): Now, Mr. Chairman, may I be privileged to give this description, in the way of a toast, as to where West Virginia is:

Here is to West Virginia, whose most northern city is farther north than Pittsburgh, Pennsylvania, hence it is a northern state; whose most eastern city is farther east than Rochester, New York, hence it is an eastern state; whose most southern city is farther south than Roanoke, Virginia, hence it is a southern state; whose most western city is farther west than Canton, Ohio here is to West Virginia, and whether she be eastern, western, northern or southern, she is a damn good state for the shape she is in.

CAPTAIN W. P. WHITE: What relief has been offered the corporations in West Virginia by the sales tax?

MR. HALLANAN: That is the only tax applicable to corporation activity, except the charter tax, which is a very nominal tax, based upon the capital stock, a very nominal tax. In other words, any corporation under fifty thousand dollars pays a tax of thirty dollars a year for its charter.

MR. JOHN HARRINGTON of Wisconsin: What about general property taxes?

MR. HALLANAN: That is applicable for local purposes, of course. CHAIRMAN WHITE: I suppose there is some exemption to the clergy under that, and school teachers?

MR. HALLANAN: The clergy usually do not get over ten thousand dollars in West Virginia.

CHAIRMAN WHITE: That applies to the lawyers also, I suppose.

MR. BUELL: If there is time, I should like to point out the distinction between the tax on coal and oil, and so forth that the gentleman has just described in West Virginia and the tax that the Minnesota legislature levied at its last session upon iron ore.

CHAIRMAN WHITE: Pardon me a moment; I think it should be confined to asking the gentleman questions.

MR. BUELL: Beg your pardon; I understood the rules provided for discussion not to exceed five minutes.

CHAIRMAN WHITE: Only discussion upon the points raised in the paper.

MR. BUELL: And that is exactly the point I am discussing. The point is the difference between their tax on coal and minerals and our tax on iron ore.

CHAIRMAN WHITE: Yours is not a sales tax.

MR. BUELL: It is exactly the sales tax.

CHAIRMAN WHITE: I think the discussion should be confined to questions pertaining to the sales tax.

MR. BUELL: Then I have nothing to say, because the Minnesota tax is so totally different in its character, and to my mind so far superior to the West Virginia tax, that I think this conference ought to be enlightened as to what we have done in Minnesota, but if the conference does not want to know what we have done in Minnesota, then I will keep still.

MR. H. C. MACKENZIE of New York: I move the gentleman be granted the privilege of the floor for five minutes to explain.

CHAIRMAN WHITE: Does the motion receive a second? (Motion seconded)

CHAIRMAN WHITE: Very well, you have five minutes.

MR. BUELL: I think the conference should know that the Minnesota iron ore tax is based on the principle of not taxing the gross value of the ore. If we were to tax the gross value of the ore taken out of our mines up here, even one per cent, some of the mines would be bankrupted the first year, because the one per cent tax on gross value of the ore would be more than their entire profit. If we were to tax the gross value of the ore on some of the mines ten or fifteen per cent, they would not be hurt hardly at all. That is the reason why the legislature of Minnesota abandoned the idea of taxing the gross value.

In the year 1918 the M. A. Hanna company took out in this state nearly one million tons of ore and took it out in such a way that their total net profits reported to the federal government was only eighteen thousand dollars. If we had had the gross value tax, which was once attempted to be put over in this state, of two per cent on the gross value, their tax that year would have been fifty-four thousand dollars, three times their entire net profit. Those facts led the legislature to adopt a different principle entirely, and the tax that is now on the statute books, and has been sustained by the United States lower court-and we think it will be sustained in the supreme court without any question-is derived by reducing or by subtracting from the total value of the ore at the mouth of the mine, first, the entire labor cost of separating the ore from the matrix and bringing it to the surface ready to be taken away; secondly, a proportionate share of the cost of sinking the shaft and running the drifts in underground mines; third, a proportionate share of the cost of removing the over burden in open pit mines. The whole thought is, that the tax should not be levied upon the business or occupation or labor involved in the mining of the ore, but it should be levied upon that value of the ore which is due to its location or its quality, that part of the value which Mr. Ben Dickson very aptly called the heritage element in its value, and which some of the opponents of the bill very seriously objected to. Although while the bill is labeled an occupation tax, and the United States court has said "yes, it is all right, it is an occupation tax," you will notice that the basis of taxation is not to any considerable extent the occupation of mining ore but is to almost the entire extent the heritage or natural value of the ore as it lies there in its native position in the earth. Now, that is something that is entirely new, in the United States, so far as I have been able to learn, in all attempts to tax natural resources of this character, where the natural resources are destroyed in the process of production. The rate of the tax is six per cent, in my opinion not nearly enough.

The first thought was that the tax should be ten per cent, but the commission would not let it go out with anything more than six. Just one word more. In order to show you that we have not finished the job yet but expect to do so at the next session of the legislature, this tax only applies to those owners of mineral lands who operate their own mines, and you notice that they secure this value because their mines are rich, because the ore is high-grade, or lies near the surface so it can be shoveled up easily. There is another group of land owners in Minnesota who do not operate their mines at all. They lease them on a royalty, and they collect all the royalty that the traffic will bear. That is a habit that land owners have, you know; and we had a bill to tax the royalties that those land owners collect, so as to have two groups of land owners on the same general basis. That bill passed the house with only fourteen votes against it out of one hundred and thirty-one, but was lost in the senate by a very few votes. I may remark that thirteen of the senators that voted against it are not now in the running, and in my opinion six or seven more won't be after November.

It is perfectly plain, of course, that those two groups of land owners should be treated alike, that if you tax the royalties collected by one group six per cent, you should tax the net clean-up, the net profit, which has exactly the same economic character, six per cent. If you tax one ten per cent you should tax the other ten per cent.

CAPTAIN WHITE: Are these properties that pay other taxes beside?

MR. BUELL: Oh, yes, that is outside of all this. This is a special tax at the time they sever the ore and get away with it, on the theory that they are destroying the natural resources, which will never be there again. The state will never get another whack at it under any circumstances, and for that reason it is entirely proper that a part of the profit should be yielded up to the state.

Perhaps it will be interesting to you to know that the net clean-up in Minnesota by iron mine owners in normal years will run from sixty-five to eighty-four millions of dollars, clean velvet over and above all expenses, everything-their net profits.

CAPTAIN WHITE: How much did the Hanna company pay on that basis?

MR. BUELL: On the basis of six per cent the Hanna company would pay six thousand dollars out of their eighteen thousand dollars, but the big fellows clean up six or eight millions on ore, where there is two or three dollars profit in every ton they dig out. They would pay six per cent on the profit.