MR. BUELL But if they did operate they would not pay any tax. MR. ROTHSCHILD: Why should they operate at a loss? Business is not carried on that way.

MR. BUELL: Certainly they will not operate at a loss; they will quit; but if they were operating at a loss and our tax were enforced, they would pay nothing.

MR. ROTHSCHILD: Consider this one corporation which turned out one million tons, with an eighteen thousand dollar profit, with reference to the condition which would be brought about if they · had a sales tax-something they could not pass on because the sales tax would be more than the profit. Of course your answer is that they could not afford to operate, that that is the kind of organization which would have to close down. The rich concerns which make so much money on their ores certainly could pay the sales tax if you passed one. In other words, the smaller the profit, the more the necessity would arise of passing it along. With a large profit, of course, a corporation could absorb the tax, a tax of one per cent or less than one per cent.

MR. BUELL: The whole thing hinges on this: there are a lot of miners up in the iron country of Minnesota working on a very close margin. There is very little profit in the business. They continue to work at a very small profit, but if we were to put a gross tax upon them-we proposed a two per cent tax on them— and the fact is it figured out that the tax would be heavier than their profits. That was the principal reason we induced the author of that bill to withdraw it from the committee and had it made over so it would be a tax not on their gross profits, not on the gross value of their ore at all, but upon the net profits. Now, the net profit, of course, in the case of iron ore is the economic equivalent of royalty. That is, if they did not operate as owners, they could not get it in the form of royalty.

MR. ROTHSCHILD: Could they get it from a mine so situated that it was not a paying mine?

MR. BUELL: No, we are not discussing that at all.

MR. ROTHSCHILD: A mine which turned out one million tons and then turned out eighteen thousand dollars profit is not a paying mine, and then the other mine that worked for four years and did not make a profit, those are not paying mines.

MR. BUELL: I hope the gentleman won't get it into his head that most of our mines are of that character. The most of them are not of that character. We have thousands of acres of iron land in northern Minnesota that would not pay to operate at all at the present time, if there were any tax or any burden upon them

whatever. They may be some day. Then we have mines up there where it does not cost at present over twenty-five or thirty cents a ton to shovel the ore by the steam shovel into the car to ship it to the terminal point, ore worth three, four and five dollars a ton, according to quality. This tax was designed to reach those fellows the fellows cleaning up a very large profit by destroying the natural resources up there, taking it away from the state. Nobody had any design to reach the small man not making any profit, and this tax is so designed that for practical purposes it won't reach the small man making no profit or only a very little profit. That is the merit of the proposition.

MR. ROTHSCHILD: It seems to me that in mining, as in all other business, there are a number of highly watered plants. Those plants can only work at a profit under the very best conditions. They are a very small percentage, however, of the plants in business or in the mining world, and therefore on the question of a tax system, which is necessary to get income in these days when large sums are necessary, it seems to me too much regard ought not to be paid to that very, very small percentage of dead ones in all lines of business.

MR. BUELL: This gentleman thinks we are not going to get revenue enough. We are going to get out of our iron ore tax more revenue than in West Virginia.

MR. ROTHSCHILD: It is not that you are not going to get revenue, but I am afraid that the political influence of a very, very small percentage of unsuccessful operations in the country is used and will be used to discredit a perfectly fair system of taxation.

CHAIRMAN WHITE: I think that is enough discussion on that point. I think probably the rest of you are in the same position that I am; you have mining stock that has never paid any dividend. Gentlemen, your permanent chairman will take charge of the meeting.

CHAIRMAN LORD: I should like to ask Mr. Sneed if there is to be a meeting of the committee on resolutions immediately after adjournment.

MR. SNEED: Yes, Mr. Chairman, just long enough to effect an organization, to see how near complete that committee is. I understand that all the names have not been handed in up to now.

CHAIRMAN LORD: Perhaps the secretary might read the list of states that have not reported their selection for the committee on resolutions.

(Roll call by the secretary of states who have not supplied the name of the member of the resolutions committee)

SECRETARY HOLCOMB: I have a resolution that has been handed in. It relates to bank taxation. It is submitted by C. J. Tobin of New York.

(Resolution read by the secretary)

CHAIRMAN LORD: The resolution will be referred under the

rules.

SECRETARY HOLCOMB: The committee on taxation of public utilities is requested to meet at the close of tonight's session. The committee on nominations of the National Tax Association is requested to meet in this room at the end of the sixth session. That is Wednesday afternoon-tomorrow afternoon.

CHAIRMAN LORD: Are there any other announcements from the

floor?

MR. C. T. MOFFETT of Minnesota: I want to call attention to the fact that tomorrow at two o'clock we have provided a trip for the ladies. There are not many ladies here now, but I hope the men will tell them that we are all ready for that trip. The Minneapolis institute of arts has invited all the gentlemen and the ladies, either severally or together, to visit the institute, and all you have to say is you are from the national tax association, and that is your open sesame. The Minneapolis institute of arts is on 24th Street and Third Avenue south. We will provide some means of getting you to the building.

MR. WHITE: I should like to say to the members who are assembled that we all manage to catch trains on time. Most of you are public officials. Now, if we cannot begin our convention sessions at the time appointed, it does not speak very well for public officials.

CHAIRMAN LORD: That is very timely and appropriate and applies and has applied so far, to the meetings of the conference. Now, if there are no other announcements the convention will recess until eight o'clock this evening.

(Adjournment)

FOURTH SESSION

TUESDAY EVENING, SEPTEMBER 19, 1922

CHAIRMAN LORD: The chair has been requested to announce that the sub-committee of the committee on resolutions will meet immediately after adjournment tonight to consider, at least in part, the resolutions that have so far been submitted. I assume that you gentlemen know who are members of this committee. Perhaps I might read the names.

(Names of committee read)

Professor Dowry of our state university wishes me to extend on his behalf an invitation to all professors of economics attending this conference to attend a smoker to be given by the school of business, in private dining room A immediately after adjournment. Possibly the dean has seen most of the college men who are here I know it will be an enjoyable occasion.

The topic for discussion tonight is one of vital importance to the State of Minnesota, and I know it must be to a great many states in the Union at the present time. The State of New Hampshire has given a great deal of attention to the troublesome question of forestry taxation, and because of this I am going to call to the chair this evening Mr. Fletcher Hale of New Hampshire, who will preside at this session.

MR. FLETCHER HALE, presiding.

CHAIRMAN HALE: Mr. President, ladies and gentlemen of the conference: I thank you, Mr. President, for the highly appreciated but undeserved compliment. Last fall at Bretton Woods, most of you remember, there was authorized the appointment of a committee to study the whole subject of forestry taxation and to make report at this meeting, and the program for this evening consists of the report of that committee and ensuing discussion thereon. The report of the committee will be presented by Professor Fred R. Fairchild of Yale University-Professor Fairchild.

REPORT OF THE COMMITTEE ON FOREST TAXATION I. INTRODUCTORY-THE PRESENT PROBLEM

For a generation and more there have been complaints from those interested in forestry of the unfortunate effects of the American tax system upon forests and the enterprise of forestry. The

scientific study of the subject in America as a problem in the economics of taxation may be said to have started when the matter was taken up jointly by the National Conservation Commission and the United States Forest Service in 1908. The chairman of this committee was delegated by both organizations to make an investigation and report. That report appeared in 1909 as part of the report of the National Conservation Commission and a preliminary statement of the substance of it was presented to this association at its second annual conference in Toronto, in 1908. At that conference papers were read also by Mr. A. C. Shaw of the forest service and Dean B. E. Fernow of the University of Toronto. Four years later the chairman again addressed this association, at the sixth conference in Des Moines in 1912, giving at that time some suggestions for a practical plan of forest taxation, based upon his further study of the problem for the United States Forest Service. At this meeting a committee on forest taxation was authorized, whose report was presented by the present chairman at the seventh conference, in 1913. In the same year there appeared the report of the sub-committee on forest taxation of the fifth National Conservation Congress, whose main conclusions followed substantially the principles laid down in the report of your own committee. Following this five-year period of activity, the subject has been permitted to rest for a decade, except for the report of the sub-committee of the committee on national forestry policy of the Chamber of Commerce of the United States, which appeared last year (1921). This report contains an interesting account of the state of forest tax legislation in the several states, but makes no attempt to carry further the study of economic principles. At the conference last year (1921) the subject was reopened by the paper of Professor H. H. Chapman and considerable interest was aroused, resulting in the authorization of the present committee.

It is not necessary at this time to go over the ground already covered in previous addresses and reports before these conferences; suffice it to say that the earlier study of this problem succeeded in establishing certain conclusions which may be summarized briefly as follows:

(1) That as a rule forests have been assessed far below their true value, and that, owing to this circumstance combined with lax administration of the tax laws, forests have not generally been subject to excessive taxation;

(2) That barring certain localities and some individual cases. taxation has not been responsible for destruction of the forests or for failure to reforest cut-over lands or to practice forestry. These results have been due to other causes more potent than taxation;

(3) That the property tax is fundamentally defective when ap