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December 19, 2003

Hoosiers will notice hike in farmland taxes, expert says

WEST LAFAYETTE, Ind. - Hoosier farmland owners are noticing an increase in property taxes due to new assessment rules, according to a Purdue University specialist on state and local public policy.

"Given the rules as they are currently proposed, the average farmland owner will see a 112 percent increase in the value of farmland and a 25 percent hike in property tax on farmland," said Larry DeBoer, professor of agricultural economics. "The 1998 assessment said that farmland was valued at $495 per acre; today the current base rate per acre is $1,050."

In 1998 the Indiana Supreme Court said that the rules for assessing property were unconstitutional. The court required that new rules be based on "objectively verifiable data" with "meaningful reference to property wealth."

For most property this means assessing land based on market value, the predicted selling price. Moreover, the court ruled that "assessment based upon value in use is a reasonable measure of property wealth." This means that farmland can be valued based on its agricultural productivity, not its development potential.

Today farmland is assessed based on its use value. To determine use value, government officials took the $495 original base price and multiplied it by the soil productivity factor, which is generally 0.5 to 1.28 depending on its location in the state. DeBoer said that soil better suited for growing corn gets a higher factor.

There are additional factors, such as flooding or trees, that can decrease land productivity. Land that floods every other year has its assessment reduced by 50 percent, for example.

"This is called use value because the only thing that counts is productivity," DeBoer said. "Farmland in rural Warren County or downtown Indianapolis is evaluated the same way, even if it could be sold for tens of thousands of dollars for development. So, this is a tax break for farmers whose land borders residential or business development."

Government officials say that they $1,050 current base rate is constitutional; however, this number is still relatively lower than the average market value of farmland, which is more than $2,000 an acre, DeBoer said.

Of course, farmland is not all of farm property. In many places, farm buildings, equipment and inventories should experience tax reductions that will at least partially offset the land tax hikes.

DeBoer said that this new tax assessment is a rearrangement of tax burden. According to DeBoer, there are tax hikes for owners of farmland, homes built before 1960 and rental homes. There are tax decreases for owners of homes built after 1960, manufactured homes, commercial property and utility property.

DeBoer said the large increase in property tax will cut into producers' income and increase the likelihood of many farmland owners selling their holdings in the future.

DeBoer said he expects that Indiana farmland values will increase 2 percent to 4 percent in the coming year.

Writer: Meggie Issler, (765) 494-8402,

Source: Larry DeBoer, (765) 494-4314,

Ag Communications: (765) 494-2722; Beth Forbes,
Agriculture News Page

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