Purdue Study Quantifies Rural Impacts Of Farmland Property Tax Cut

Feb 8, 2017

 

A new study from Purdue University on the effects of the state’s new method for taxing farmland shows what rural areas will take the biggest hit from the change.

Indiana taxes farmland mainly on the value of crops the soil can produce. But that calculation has lagged behind the current crop market.

It based farmland property assessments on 4-year-old crop prices, meaning taxes climbed even as farm revenues began to decline.

The state’s new formula, passed last year in Senate Bill 308, uses 2-year-old crop prices – about as current as possible, says Purdue ag economist Larry DeBoer.

This means, DeBoer says, “what’s going on on the ground on the farm is more likely to be reflected sooner in the assessed value of farmland.”

DeBoer led a new study that found the change will mean a nearly 50 percent decline in those assessed values by 2021.

“And that should mean substantial property tax cuts for owners of farmland,” he says. “But then the question is what does it mean for everybody else?”

DeBoer says rural towns can’t absorb that kind of cut.

He estimates the most rural counties, like Warren and Jay, will seek to raise taxes to offset the new assessments.

But he says that will push some taxing entities up to their state property tax caps – meaning they’ll max out their revenues anyway.