Purdue professor says farmers facing higher land taxes
Purdue professor says farmers facing higher land taxes
BY DAVE KURTZ
(Created: Friday, March 14, 2008 11:39 AM EDT)
In spite of proposed property-tax relief, Indiana farmers are likely to find themselves in a tax crisis this year, a Purdue expert said.
The base value of farmland will rise from $880 per acre last year to $1,140 for this year's taxes - an increase of 30 percent.
"That is going to translate into a pretty hefty property-tax increase for farmers in 2008," said Larry DeBoer, a Purdue agriculture economics professor.
One of Indiana's leading experts on taxes, DeBoer recently spoke in Auburn at a seminar sponsored by the DeKalb County Community Foundation.
The rise in farmland value comes as no surprise, he said. The new base value was calculated a year ago, and property-tax relief efforts in the Legislature do nothing to change it.
The taxable value of farmland follows a six-year average based on incomes and interest rates. Strong farming years in 2003 and 2004 are influencing the base value now. It will continue to rise as high farm income figures from 2007 come into play.
DeBoer predicts base values of $1,200 for 2009, $1,250 for 2010 and $1,380 for 2011.
"I think that once this starts happening, there will be interests in Indianapolis who will be looking for some other way to do the formula," DeBoer said.
However, he said, "people are thinking that farmers are doing pretty well ... It's going to be an uphill climb for farmers to do anything about this, but attempts will be made."
State legislators are focusing on property-tax relief for homeowners this year, he said.
"If you're not a homeowner, you'll end up paying about what you paid before" in the plan that seems likely to pass, he said. "Homeowners do very well in this plan. Everybody else doesn't get very much."
Farmland is likely to get a cap assuring that taxes will not exceed 2 percent of assessed value. But that does not protect farmers from sharp increases in their land values, he said.
The Indiana House of Representatives recently voted to cap homeowner taxes at 1 percent of the owners' income, instead of 1 percent of tax value. That would cut home taxes even more dramatically than the original plan, DeBoer said.
"They didn't think this thing through, but that was not the point," DeBoer said. Democrats wanted to create a way to negotiate with Gov. Mitch Daniels, he said.
DeBoer said Democrats are worried about what will happen to the 28 percent of Hoosiers who rent their homes.
"They don't get any property-tax relief, but they do pay added sales tax," DeBoer said. The governor's plan raises Indiana's sales tax rate from 6 percent to 7 percent.
Democrats have tweaked the relief plan by adding an income tax break for renters and an increase in the Earned Income Credit for low-income Hoosiers.
"You add those together, it pretty much knocks out the sales tax increase for low-income renters," DeBoer said.
Whatever tax plan passes, it is sure to have unexpected consequences, he predicted.
"For the next several years," he said, "we will be cleaning up, we will be adjusting, we will be editing what we've done this year."
Base value of farmland per acre
2007 $880
2008 $1,140
2009 $1,200
2010 $1,250
2011 $1,380
Source: Larry DeBoer,
Purdue University