Back in the 1980s, the method of appraising agricultural land for property tax purposes was changed. At that time ag land, like all other classes of property, was valued on its market value. But inflationary pressures were making it difficult for farmers and ranchers to pay their property tax bill. Ag land is the only class of property which never grows, and the old saying that “they aren’t making any more” is entirely accurate.
Because of that unique characteristic of ag land, it has always represented a store of value and a safe haven for money in uncertain economic times. In other words, when the future is unpredictable, many people invest in ag land because it is seen as a very safe place to invest while they wait for better investment opportunities to develop elsewhere. That is certainly a large part of the reason that land prices have skyrocketed in recent years. For at least the past twenty years, ag land prices have steadily risen without any downturn while grain prices and yields have varied wildly from year to year. Land is subject to inflationary pressures that other classes of property avoid, and the reason is because they aren’t making any more!
So in 1986 the Kansas constitution was changed to allow ag land to be valued for property taxes based on its productive capability rather than its market value. It is a complicated formula, but works well to estimate the producing capability of the land. Now, however, that formula is under attack.
In 2012 when a massive income tax cut was proposed, assurances were made that cutting income tax would not result in higher property taxes. Many of us were not buying the story then, and we now have solid evidence that the ploy was a smokescreen to gain enough votes to pass the tax cut.
Last week Senator Jeff Melcher (R-Leawood) introduced a bill which would radically alter the way that agricultural land is valued for property tax purposes. SB 178 would cause a massive tax shift from all other classes of property and increase taxes on ag land drastically. Statewide, the bill would increase valuations on dryland by an average of 408%, irrigated farmland by an average of 593% and grassland by an average of 672%. The effect on farmers, ranchers, and rural economies would be devastating.
Once again, the consequences of an overly-aggressive tax cut plan are becoming evident. Instead of laying waste to the economy of rural Kansas perhaps it is time to own up to the fact that we went too far, too fast. The tax cut of 2012 was a bad plan. Our focus now should be to correct the plan’s excesses.
I am honored to represent the people of the 118th District in Topeka, and I welcome your questions, concerns and suggestions.
Representative Don Hineman can be contacted at (620) 397-3242 or firstname.lastname@example.org.