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Farm Property Tax Expected To Jump In The Next Few Years

The base rate for an acre of farmland is supposed to reach $2,000 by 2015. It was $500 in 2000.

Corn

Photo: Grampy (Flickr)

The farm property tax in Indiana is based on the rate of corn over a five year period.

Farming is just about all Ken and Judy Sebastian have ever known. Both of them were raised on farms, and they have been running their own farm, growing soybeans and corn and raising cattle in Morgan County for more than three decades.

But as Ken surveys the fields where he will sow corn soon he can’t help but worry about all the things that are simply out of his control. The past few years have been somewhat of a roller coaster for the Sebastian’s business. Corn prices have been higher the past few years but that’s only because there’s been less corn on the market. Dry weather has meant low yields for farmers.

So even though they may be selling their corn for more money, they are selling less of it. Sebastian says it is difficult to break even let alone turn a profit.

“It costs over $400 an acre just to grow an acre of corn, so that adds up pretty quick when you multiply that by a few hundred acres,” he says. 

“If corn prices do go low, it’s going to be painful in a few years.”
-Judy Sebastian

Corn Prices’ Effects On Taxes

Then there’s another issue. Taxes. Farm property taxes are expected to increase by more than a third over the next three years because in Indiana the tax rate on farmland fluctuates based on the price of corn. So as long as corn prices keep going up, so will the taxes.

Purdue Extension Educator Jenna Smith says the rate is a five year average, so no single year’s prices counts too heavily, and, she says, it adjusts the price for land that is not good for growing crops.

“It takes into consideration is the farmer’s land frequently flooded, does it have a lot of trees, the soil productivity has a factor into it,” she says.

But these provisions have not stopped taxes from increasing significantly. The base tax rate for an acre of land was $500 in 2000. The rate is expected to be four times that amount or $2,000 by 2015.

The taxes are also on a four year lag. So if corn prices drop anytime in the next few years, farmers will be paying high taxes even and be getting less money for their crop. Judy Sebastian says it’s easy to see how that could put many farmers in a financial dilemma.

“If corn prices do go low, it’s going to be painful in a few years because like you say then the lag will really hurt us, and I can’t see prices are going to stay high forever. We’ve seen so much $2 dollar corn in our lives,” Judy Sebastian says.

There is nothing farmers can do to control the price of corn so the Sebastian’s have found a way to survive the fluctuations and the unknowns. Judy says they have to plan far in advance because they do not get a steady income throughout the year.

“We might get a big crop check or a big cattle check and then we have to set that aside and save it for when we need the money,” she says. “We can’t go out and blow it, but we’ve been farming or so many years you just learn because you know you’ve got taxes coming up, you know you’ve got a tractor payment coming up so you know you just have to set it aside and not touch it.”

Reforming The Farm Tax Formula

As Judy trails off, neighboring farmer Warren Beatty drives up in his white pick-up truck. He has just come from the courthouse trying to sort out his own taxes.

“We got her straightened out. That’s all I’ve been doing this morning is trying to straighten out property tax that I didn’t know [about],” he says. “Like I say there’s got to be a better way. I don’t know what it is.” farm property tax increase

Many farmers are hoping the legislature will consider changing the farm property tax formula next year. Indiana Representative Jeff Espich is the chairman of the state House Ways and Means Committee. He says he does not expect any drastic changes. The tax formula has been in place for as long as he can remember, and he says it works well.

“I think the system is refined continuously,” he says. “The Indiana Farm Bureau for instance is in the halls of the statehouse here every day working on behalf of their membership and reflecting the needs of their members in a fair and honest way. So old is not necessarily bad.”

Espich says nobody likes taxes, but farmland is actually undervalued, so farmers are paying less in taxes than they could be.

“Farmers are correct, the values have gone up substantially, but I’ll share a little secret, none of them would sell their farm ground for what they pay on that assessed value right now,” he says.

Back at the farm, The Sebastians say the tax increases could make life a bit tougher, but like they have always done, they will come out alright–one way or another.

Gretchen Frazee

Gretchen Frazee is a reporter/producer for WFIU and WTIU news. Prior to her current role, Frazee worked as the associate online content coordinator for WFIU/WTIU. She graduated from the University of Missouri-Columbia where she studied multimedia journalism and anthropology. You can follow her on Twitter @gretchenfrazee.

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  • http://twitter.com/LynnFDR LynnFDR

    Farmland rents ethically should not be tied to the price of corn or productivity in any one year.  But the property tax of farmland is.   I’ve always considered that to be verging on the hypocritical, and if not, certainly taking advantage of land owners.  The property tax I pay is 2.5 times that I paid at the beginning of this century.  The prior decade taxes were primarily flat.  Crops have been completely flooded out the last two years; and yet taxes keep going up.  When does a farm business get a tax break like they hand out to the likes of a Toyota?

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