March 22, 2016
The Indiana General Assembly members just didn’t wake up one morning, look at a graph and map sent to them by Indiana Farm Bureau, and collectively say, ‘Yes, it’s time to give farmers real property tax relief.’ That’s not how politics works.
Katrina Hall, director of legislative services for Indiana Farm Bureau, Inc., says an outpouring of visits, phone calls and other contacts by members and farmers in general pushed the property tax football over the goal line. However, the information that Farm Bureau and others uncovered gave farmers plenty of ammunition to help prove their point.
Here were two key pieces of information Indiana Farm Bureau and Larry Deboer, a Purdue University Extension ag economist, provided that helped make the need for true property tax relief crystal clear.
PAYING MORE THAN THEIR FAIR SHARE: Farmers are willing to pay for essential services, such as fire protection, but the rate being paid on bare farmland far exceeds the cost of services compared ot the rate paid by homeowners.
Farmland property tax bills soar while homeowner tax bills sink
Purdue’s Deboer cut through all the rhetoric and put the facts in a bar graph that tells the message quickly. For all the talk about property tax relief over the past decade and a half, total net tax after credits for all Indiana taxpayers for property tax declined only 3.9%. Gross assessed valuation actually increased by 9%.
The real difference was in who got decreases, and who paid more than before. Homeowners from 2007 to 2015 saw a net 30.4% decrease in property taxes. Gross assessed valuation rose only 2.7%. Farmers, on the other hand, saw a net increase of 62.6% on property tax bills for farmland. The gross assessed valuation was actually up by 81.7%
That’s a contrast no one can miss.
Property tax values on Indiana farmland tended to be higher than those in neighboring states
To find out Indiana Farm Bureau staff went to the phones and contacted counterparts in other states, Hall says. After 2015’s session but before any action this legislative session, Indiana’s property tax rate per acre was one of the highest in the Midwest. The range was greater in Illinois, with a few values higher and some much lower than in Indiana. Rates in other states were generally lower.
States differ on the mix of property taxes, income tax and sales tax from state to state. But when you look strictly at property taxes, and what it was costing Indiana farmland owners, Indiana’s rate was one of the highest, Hall said.
Data wasn’t available from a few states, and those were marked as NA for not available on the map. Some states cap tax rates, others don’t.
There is a difference between capitalization rate and cap rate, Hall explains. Indiana showed a ‘cap’ rate of 4.77% as of 2015, but that wasn’t a cap on how high taxes could go. Instead, it was a measure of the rate of return per acre vs. the property tax rate.
A MIDWEST COMPARISON: This map shows how property taxes on farmland compare across the region. This was prepared by Indiana Farm Bureau.
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