Differential Tax Assessments for Agricultural Use
Differential taxation is a solution for the unique problems of agricultural lands. Although all industries and economic endeavors have their unique risks, agriculture has always faced certain challenges that differentiate it. Many of the risks associated with agriculture and farming are completely beyond the control of the farmer. Agriculture is almost completely dependent upon the weather for its success; it is susceptible to destruction by pestilence; its commodity prices are set by federal regulatory authorities rather than reflecting local or regional market conditions. It is also a land intensive use, successful cultivation of crops or raising of livestock in a global market typically requires large tracts.
As regional economies transition away from agriculture, the value of agricultural land can be significantly affected by land prices associated with development. Farms with hundreds or thousands of acres can be seriously impacted by tax increases based on market values for housing and commercial development in lands that historically had been used for agriculture.
RATIONALE
Preservation of agricultural and farm land has numerous benefits for a community green infrastructure network, including balancing the tax base, maintaining a diverse economy, preserving natural and environmentally sensitive resources and contributing to aesthetic qualities and sense of place. However, the unique risks and challenges involved with the agricultural industry can make farmland preservation a unique challenge. Of the numerous challenges to agriculture, one element that communities can exercise some degree of control over is land value and taxation. Every state in the
EFFORT REQUIRED
Differential taxation laws are typically established by the state legislature through its revenue laws. Local taxing authorities are responsible for implementing these laws and ensuring compliance with state enabling legislation. Local taxing authorities within the community are therefore empowered to give preferential taxation to farmland.
BENEFITS
Differential tax programs for agriculture help keep the costs of business in line with economic return. They keep agricultural land economically viable for agricultural uses, and they also may more closely reflect an equitable collection of taxes relative to the services required for agricultural land. Further, these programs represent significant deterrence to speculative land conversion to development.
RISKS
Participation in a differential tax programs are usually voluntary and can expire within finite intervals. They also can be violated when a conversion to another use occurs though this often incurs a penalty. Nonetheless, these are not permanent methods of agricultural land preservation comparable to conservation easements or purchase of development rights. Differential taxation does shift the tax burden onto those properties that do not receive the benefit. However, often that shift is minimal and generally considered to be worth the cost to further the benefits of agricultural preservation within a community.
ACTION AGENT(S)
State and local governments, private property owners
COSTS
The cost of implementing differential tax programs is typically absorbed within the local government administration, but administering and monitoring compliance with these programs can require a high level of service in communities where they are widely used. Additionally, the impact to a community’s overall tax digest is a relevant consideration, as differential tax programs shift a certain amount of the tax burden to non-agricultural lands.
The system of land, natural resources, and natural habitats that collectively comprise a community's underlying ecosystem. Green Infrastructure is present in every city, although its size, diversity, and strength vary greatly. Importantly, green infrastructure can be used to help offset negative environmental impacts, for example stormwater runoff and urban heat island effect.
