Increasing Taxes on Ag Lands Is Hardly a Pro-Growth Strategy

By Jay Rempe

Nebraska Farm Bureau Vice President/Governmental Relations

Jay Rempe, FB VP/Governmental Relations and Ag Economist

The Platte Institute of Economic Research released a “pro-growth strategy” for Nebraska last week which was authored by Dr. Eric Thompson of the University of Nebraska. The report included a recommendation that agricultural land be valued at 100 percent of market value, the same as residential and commercial property. Currently, Nebraska agricultural land is valued at 75 percent of market value.

Thompson said, “Overall property tax rates could fall in many Nebraska counties… If the policy was pursued in a revenue-neutral manner, it would yield a much lower property tax rate in the state’s rural counties, and property tax rates would fall for non-agricultural commercial, industrial, and residential taxpayers. The results would be improvement in economic growth if state government ensures rural counties are not penalized for lowering property tax rates.”

It’s almost as if the study is saying that increasing property taxes on ag land is the silver bullet that will foster statewide growth. But it’s difficult for me, as an ag economist, to figure out how increasing the already-heavy property tax burden on the state’s largest economic engine can be considered pro-growth.

Property taxes on agriculture in Nebraska are already among the highest in the nation. In many locales, ag land owners are a minority of the population but they’re paying a majority of the cost of local government and local schools. The current system of valuing ag land at 75 percent of market helps balance the property tax burden in local subdivisions.

Consider:  Agricultural land owners already pay more than 50 percent of the local property taxes in 66 of Nebraska’s 93 counties but they account for a minority of the population in these counties, and they receive no more benefit than any other property taxpayer. You can check out the situation in your county here.

Some individual landowners have experienced even higher increases.  During that last five years, property taxes on agricultural real estate statewide have increased nearly 43 percent: almost TWICE the 22 percentage increase on residential properties. Increasing ag land values to 100 percent of market would only exacerbate the taxes paid by a minority.

The Platte Institute study seems to ignore the fact that Nebraska can’t make tax policy in a vacuum. Nebraska continues to value agricultural land on market value while most other bordering states with significant agricultural sectors value land based on productivity.  Moreover, several of these states assess land for tax purposes considerably less than Nebraska.

The net result is that the higher taxes paid by our ag land owners puts Nebraska’s farmers and ranchers at a competitive disadvantage. Increasing these taxes would put us at a greater disadvantage and harm our economic growth – which is exactly the opposite of the study’s goal of proposing pro-growth strategies.

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