Fort Wayne Jounral Gazette: Tax Breaks for Farmers = Tax Increase for Residential Property

Dan Stockman and Sarah Meisch have an article in the Fort Wayne Journal Gazette entitled Tax change a ‘balancing act’ — and, it has quotes from everyone’s favorite economist, Larry DeBoer.

As part of its whirlwind session this spring, the Indiana General Assembly changed how the value of farmland is calculated for taxes, a change that statewide will lower taxes on farmland an average of 14 percent. But that cut has to be made up with higher taxes on homes, factories and stores.

. . .

Salomon said property taxes are especially unfair because they stay the same – or go up – even when prices or crops are bad. They also punish farmers who keep up historic old barns, even though they are obsolete and can’t be used.

“The legislature knows farmers aren’t going to go delinquent,” Salomon said. “They scrimp and save and pay their taxes. So each year they just keep adding it on and adding it on.”

This year’s changes came about because farmland isn’t taxed like other land in Indiana.

There is a base rate for every acre, which is then subjected to a formula for what the land produces, so better land is taxed more. Last year, the base rate more than doubled to $1,050 an acre; this year the General Assembly lowered it to $880.

“Its base rate is adjusted by a factor of its productivity in growing corn, how fertile it is,” said Lawrence P. DeBoer Jr., a professor of agricultural economics at Purdue University.

Other factors also count.

“There’s a percentage reduction for special factors like if it floods often or is covered with trees,” DeBoer said. “If it’s covered in trees or rocks, it’s worth less.”

With the base rate dropping, farmer’s tax bills will be dropping, too.

“Every farmer ought to see a decrease in their tax bill,” DeBoer said. “Since nobody else had reassessment, the shift in the tax burden will be taken away from the farmland and to everybody else.”

. . .

What the situation really does, [Indiana Farm Bureau’s Kathleen Dutro] said, is show how unfair property taxes are for everyone. Just as a farmer facing low prices or tough weather still has to pay property taxes, a homeowner who gets laid off or is on a fixed income doesn’t get a break, either.

“Somebody’s going to win and someone’s going to lose,” Dutro said. “We really don’t think we’ve won. … We really just think it’s a way to (give farmers) the tax cut everyone else got.”

But that give-and-take is built into Indiana’s property tax system because local governments are allowed to raise only a certain amount of money, said Kurt Zorn, professor at Indiana University’s School of Public and Environmental Affairs.

“If you take away from the tax base, other tax bases will have to make up the difference,” Zorn said. “There’s no free lunch. The tax rate will be higher for everyone. Residents and corporations will see a higher tax rate than before.”

. . .

Benton County farmers will enjoy an 8.8 percent drop in taxes on farmland, but homeowners and businesses will see an 8.8 percent increase. Warren County homeowners, just south of Benton County, will see a 7.6 percent increase.

I also see from the article that counties in my general area will bear the highest residential tax increase: Benton will see an 8.8% increase, Warren will see a 7.6% increase, Pulaski will see a 5.7% increase, and Fountain will see a 5.4% increase.

I see this as being of a piece with Gov. Daniels’ decision to emphasize agriculture as its economic centerpiece and with the general condition of Indiana’s brain drain and difficulty keeping up with the rest of the country. Agriculture is important, don’t get me wrong — we all need to eat. But it might be better if we subjected agriculture to the same market forces as everything else. I’m thinking here more about agriculture subsidies at the federal level than state tax breaks particularly.

I don’t think subsidizing and emphasizing commodity production is going to do Indiana any long-term good. We need to be looking toward biotech, nanotech, and other industries which have not yet been commoditized.