“Ouch.”
That’s the first thing that comes to mind if you ask local farmer Steve Plank about the local farmland property taxes.
He and his son, Brad Plank, farm on land that Steve’s father had farmed before him. They’re typical Indiana farmers — growing corn and soybeans — and like many Indiana farmers, they feel they’re getting pinched at both ends, between property taxes and falling corn prices.
Plank said the family doles out more than $25,000 per year in farmland property taxes, “and it keeps going up.” Since tax reforms in 2007 overhauled the way Hoosier property is taxed, the dollar amount the family farm pays in taxes has risen some 40 percent, he estimated.
Under reformed tax rules, farmland taxes are calculated based on an assessment that takes into account how recent sales of farmland have resulted, how productive the land is and how well crops prices have fared, as well as other factors like input and overhead costs and government payments.
The base rate for farmland — the starting point for assessments — rose 16.5 percent this year alone. Compared to the 2007 base rate, the base rate for pay year 2015 is 133 percent higher.
“It’s starting to get pretty rough for us paying the taxes,” Plank commented.
It’s so rough that the Indiana Farm Bureau, a lobbying organization that focuses on farming issues, named farmland taxation its No. 1 legislative issue for this year’s biennial state legislative session.
The increases are “alarming,” Indiana Farm Bureau spokesman Katrina Hall told local farmers recently. “Especially in light of declining crop prices that farmers are seeing ... we consider this a crisis.”
It’s an issue that affects plenty of Cass County residents. More than 200,000 acres of Cass County land lie within the boundaries of the county’s 688 farms, according to the most recent U.S. Census of Agriculture conducted in 2012.
But the reasons for the tax increases are complex.
“Really, it’s that increasing base rate that’s causing farmland assessments to rise,” Purdue Extension Educator Tamara Ogle said. Formerly with the Cass County Extension, Ogle now works with the statewide Extension network to educate farmers and the public about local government issues.
Decreasing interest rates for farm loans and steeply increasing crops prices — yes, increasing — both contributed to the rising base rate.
Because of the way base rates are calculated, the property taxes paid in 2015 don’t reflect last year’s crops prices, which had fallen compared to previous years. They reflect the prices farmers received in 2011 — so there’s about a four-year lag between when farmers profit from their yields and when they have to pay property taxes based on those profits.
According to an explanation of base rate calculations provided by the Purdue Extension, the price used to figure pay 2015 farmland tax bills — the price of corn for 2011, that is — was $6.05, up from $4.15 the previous year. Bean prices rose too, albeit more slowly.
Farms didn’t have to struggle as much when prices were high and taxes were still being calculated based on older, lower grain prices. Now that farm income has dropped — due to both rising input costs and falling grain prices — the four-year lag and resulting higher tax assessments becomes an issue for farmers, Ogle said.
“With that four-year lag, people have known that it’s coming,” Ogle said. “That’s the nice thing about the formula. We’re able to predict assessments.”
The assessments themselves may be predictable — Ogle has calculated them out to at least pay year 2017 — but the tax rates themselves may change, too, and that’s under the control of local governments.
Rates vary from township to township, starting as low as just over 1.47 percent in Adams and Bethlehem townships in Cass County to as high as 2.99 percent in the Logansport schools portion of Miami Township. And that’s just the rural townships. Non-rural townships in Cass County, or those within incorporated boundaries, see rates as high as 4.9 percent before property tax caps are applied.
Meanwhile, townships in neighboring Carroll County see tax rates from 1.06 to 3 percent, according to the state Legislative Services Agency’s property tax report released in September 2014.
“You’re looking at two dire opposites,” Ogle said. “That’s the cool thing about Indiana and local government,” she added — taxes cover the cost of local services, such as fire protection, and as such are under local control. “It really is up to local decision makers.”