Legislative Action Provides Tax Relief for Farmers

Farmland owners will enjoy significant tax relief in 2016 thanks to action by the Indiana General Assembly. Senate Bill 436 freezes the base rate for farm ground at $2,050 per acre. That’s 15-percent less than the rate announced last December by the state Department of Local Government Finance.

After that, the calculation will multiply the previous year’s base rate by the assessed value growth quotient. That’s the percentage by which local governments can increase their maximum property tax levies each year. The current formula is a six-year average of nonfarm personal income as estimated by the Federal Bureau of Economic Analysis. The calculation keeps property taxes from rising faster than personal income. Farm income is excluded because it can be so variable.

The 2009 income figures have skewed the rate for the past several years, as personal income fell by 2.9 percent at the height of the Great Recession. The bill will increase the farmland base rate 2.5 percent in 2017 and 3.5 percent in 2018. Both are significantly lower than the 24 and 29 percent estimated under the old formula.

The Legislative Services Agency estimates farmland property taxes will drop by about $52 million in 2016 and another $87 million in 2017. In 2018 they will be an estimated $111 million less. Purdue Professor of Agriculture Economics Larry DeBoer says this means other taxpayers will pay more taxes, and local governments will get less money.