Simulation Of The Effect Of Taxation On A Marginal Mineral Resource - Introduction

The known high grade mineral re- sources in the United States are fast becoming exhausted; viable new deposits are more difficult to find and more expensive to develop; operating and capital costs have increased to meet more stringent regulatory standards. By contrast, international producers enjoy a cost advantage as a result of higher mining grades, improving technological competence, and more favorable government support. The domestic base minerals industry is finding it more and more difficult to compete in world markets. It has become essentially a marginal industry today. The current philosophy of taxation in the United States has evolved over the past century. The structure of the taxing system is based on the assumption that a firm must be able to pay its tax imposts out of profits. In principle, firms incapable of supporting the tax load should be replaced by others that can do so. This philosophy applies equally well to the mining industry, so long as it remains economically healthy. However, mineral resources are finite. The situation in the domestic base mineral industry has changed fundamentally in recent times. For the reasons given above, much of the industry now cannot continue to compete profitably in the open world market; and there are no known alternative domes- tic mineral resources more capable of doing so. Under these circumstances it is important to consider the effect of taxation not only on profitability, but also on survivability.