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Serving: IN

Farmers Outcome in Property Tax Plan Uncertain

Land values will be appraised higher next year.

Governor Daniels unveiled his property tax plan last week. Democrat Indiana House leaders indicate they're working on a plan of their own. Of course, until the final gavel sounds next spring and legislation is in place, there is no guarantee what might or might not happen in terms of property tax relief.

Bob Kraft noted late last week that Indiana Farm Bureau legislative officials are not in a position to approve or disapprove of the Governor's proposal, since it's the membership that actually sets the agenda for the state's largest farm organization. However, the veteran legislative observer did make some general observations soon after hearing and reading the governor's message.

Indiana Farm Bureau proposed its own property tax relief plan earlier this fall. That plan and the Governors plan have significant differences, but share at least two commonalities, Kraft notes. Both would totally eliminate certain property tax levies, and both would increase sales tax to help replace reduced revenue collected from property taxes.

However, the Indiana Farm Bureau proposal went further, eliminating more tax levies that are now paid with property tax money. There were also some other key differences in technical aspects of the plan that might make a difference as property tax relief plays out.

One area of concern revolves around the circuit-breaker concept in the Daniels plan, Kraft notes. It's basically a graduated system of capped increases on varying types of property, from residential to commercial. Under the governor's proposal, the cap would be linked to assessed valuation. Some other states have linked it to personal income, which seems to be fairer in some situations, Kraft observes. Implementing the circuit-breaker concept permanently would likely require a constitutional amendment.

It's still not totally clear how agriculture as a whole might fare long-term under this plan. However, without any changes, the assessed value on bare farmland will go up for taxes payable next year. The new value will be more than $1,100 per acre, roughly a 25% increase.

That's not likely to be the end of assessment increases on farmland if the current rules used by the Department of Local Government and Finance stay in place, Kraft observes. The value is determined by a rather complicated formula that looks at various farm production factors over a set number of years. As the next year rolls up, the oldest year's figures roll out. Commodity prices are one factor in the formula that feeds into the assessed valuation of bare farmland.

Since commodity prices have increased, prices are likely to be higher for years coming into the formula in the near future than for the year they replace. That will tend to up the average, and increase valuation in the near term, Kraft says.

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