Property taxes are used to fund public schools and local governments, places that are already operating with low incomes in rural areas.
(Amy Bushman - WFIU/WTIU News)
Every year, farmers like Terry Hayhurst of Terre Haute contend with operating costs and fluctuations in prices for what they grow.
“Beans are down roughly about 25 percent what they were last year, and corn is down closer to 40 percent less than what it was last year,” he said. “So those two things are kind of going against one another. Even though our profitability is extremely limited, our expenses from property taxes continue to go up.”
For the last two years, property taxes on agricultural land increased markedly. From 2022 to 2023, the base tax rate rose 16 percent. This year, it went up nearly 27 percent. And next year, it’s estimated to increase by another 20 percent.
That means within three years, the base tax rate for farmland has gone from $1,290 per acre to $2,280 per acre.
“The taxes for the ground that we own for the farm probably went up close to five to $7,000 this past year,” Hayhurst said. “That means it could be as much as $10,000 more next year.”
Compared to other taxable entities, farmland saw the largest increase in the base tax rate this year. (Courtesy of Indiana Farm Bureau)
Hayhurst, like other farmers, is pessimistic about an end to the tax hikes.
“As we've seen more and more inflation, it takes more and more money to run your counties every year,” he said. “Schools cost us more, and that's a big portion of property tax, then just county government and the cost of jails, health care for the Sheriff’s Department, fire protection, library expenses, all those things.”
So why has the base tax rate for farmland gone up so dramatically in recent years?
Tamara Ogle, Regional Community Development Educator with Purdue Extension, said farmland used to be assessed with a negotiated base rate between farmer and assessor. Now, all assessment methods use objective measures of wealth.
“What that's saying is, what is the property worth for its use if you were to sell it to a disinterested stranger,” Ogle said.
In a typical home sale, the land and house are compared to the sale of similar homes in the area.
Farmland uses the income approach. This method looks at the income someone could earn from land that is farmed or rented, and using an equation, determines the base tax rate.
“It calculates what an average farmer operating an average acre of land in Indiana could earn,” she said, “and then divides that by a capitalization rate.”
The part of this equation causing the large tax increases is the income, or yield, variable. That number comes from looking at the previous six years of crop operating income for farms and averaging them.
With higher crop yields year over year, that number will continue to increase. In 2021, corn averaged $5.45 per bushel. The next year it increased to $7.20 per bushel.
In years where crops are selling for less than average, like 2024, farmers are going to feel the squeeze.
“It's going to take a couple of years for lower prices to get into the formula,” Ogle said. “That really benefits us when prices are going up and our base rates are lagging behind. It doesn't benefit farmers as much when prices are going down and the base rate is higher.”
A graph showing the exact numbers used in the base rate formula. Only the last six years is used in the calculation. (Courtesy of Indiana Farm Bureau)
It’s important to note that an individual farmer’s tax bill can be pulled up or down from the base rate depending on the quality of their land, local tax laws, and other factors.
So, what can be done? Lawmakers and interest groups are beginning the conversation.
Indiana Farm Bureau, the Indiana Corn Growers Association, and the Indiana Soybean Alliance have all said property taxes will be one of their largest issues in the 2025 legislative session.
State Rep. Ed DeLaney (D-Indianapolis) and others are listening.
“I have some sympathy for my friends who are farmers, because their taxes, you may argue with a good basis that they're too low, but they also jump all over,” he said. “We're not used to it on the other side.”
DeLaney said lawmakers should approach the issue in a measured way to prevent harm to government entities that rely on property taxes.
“The reason we have property taxes is to support local government,” he said. “We have 2,300 units of local government that get property taxes — there's a number for you — including 270-some school districts that get property taxes.”
The base tax rate for farmland throughout the years. (Courtesy of Indiana Farm Bureau)
At the State Fair last week, the three candidates for lieutenant governor debated the issue.
Republican candidate Micah Beckwith said he and gubernatorial candidate Mike Braun would cap year-over-year increases at 3 percent.
“It can't grow 26 percent in a year," he said. "We're going to grow with economic stability. We're going to make sure that farmers are not seeing these wide swaths of just huge jumps in their property taxes,”
Democratic candidate Terry Goodwin said that while he and gubernatorial candidate Jennifer McCormick don’t have a plan yet, they will put one together.
“We're going to present opportunities in rural communities where they can grow and they can grow themselves out of these property tax crises that we're in," he said. "We've got crisis after crisis here that's been created by one party rule in the last 20 years.”
Tonya Hudson, the Libertarian candidate, said property taxes should be abolished altogether, with a 7 percent sales tax on home and property sales making up the difference.
“Instead of property taxes, when you buy a home, you pay a 7 percent sales tax," she said. "If you can't afford 7 percent at closing, you can pay 1 percent a year for seven years.”
DeLaney proposes an increase in the amount of support the state gives to school corporations.
“If we send money from the state so that our percentage of support goes up, that not only helps the kids in the school…and the teachers, but it reduces the pressure to increase property taxes,” he said.
Farmer Hayhurst said it’s important that voters talk about the issue because it affects everyone, not just property owners and farmers.
“Yes, agriculture is only 3 percent of the population, but the last time I checked, everybody eats probably three meals a day,” he said. “So everybody's involved in agriculture about three times a day.”
