Randy Kron hopes nothing breaks down on his farm — he’s going to need that money.
Crop prices plummeted so low this year that economists guess Indiana farmers will be lucky to break even. Kron was already preparing for a meager year — when his tax bills arrived.
“This one went up 20.2 percent,” Kron said, scanning one of his 2015 bills. He let out a sharp sigh. “Wow. That’s a little much.”
Kron dug for the next bill. With thousands of acres of farmland in Vanderburgh, Posey and Gibson counties, he has a pile.
“Here’s the Posey County one. This one when up 16.3 percent, on bare farmland. Wow,” he said, shuffling through pages. “Ok, so this one went up 14.5 percent. You shouldn’t be excited about 14 percent, should you?”
Farmers across the state report similar tax hikes — 10, 20, even 30 percent. It’s left them somewhat bewildered.
Farm taxes are supposed to reflect how much money a farmer is capable of earning from the land — meaning taxes should be shrinking with crop prices. So why, with crop prices so low, have property taxes jumped so high?
Unfortunately for Indiana farmers, the answer is fairly complicated, legislators say. And may take some time to sort out.
“Basically, the formula for assessing the value of farm land is an income capitalization formula,” said Katrina Hall, the Indiana Farm Bureau’s state government relations director.
That means each year, the state calculates the value of bare farmland in Indiana based on how much farmers will likely earn from it. The complex formula factors in soil quality and previous years’ farming expenses, average yields and crop prices.
It takes economists several years to accurately gather all that data, so the assessed values are calculated using information that is more than four years old. It’s generally on par with the actual year’s information, so long as crop prices don’t substantially change — like they did this year.
“There’s quite a delay,” Hall said. “The formula right now includes data that is four years old. And we had a period of time where crop prices were really high. As we are behind in calculating the values, the prices for the commodities has dropped to (nearly) half.”
Economists project that in the coming years, grain prices will continue to fall, but it will take another four years for the state’s formula to reflect it.
“I don’t guess anyone expected (crop prices) to change so dramatically is so short a time,” said Sen. Jim Tomes, who represents Posey County and parts of Warrick and Vanderburgh counties.
Tomes said he and other legislators received a rash of text messages and emails from farmers in their districts shortly after tax bills went out this year.
“This is having a major impact on farmers,” Tomes said. “Many senators, like myself, represent rural areas. The Senate as a whole is pretty keen on issues related to agriculture. So we have support to bring this thing back to a reasonable level.”
The Senate responded with a bill that would freeze assessed values where they are, and seek a method to keep assessed values from fluctuating so sharply. Senate Bill 436 passed the House and Senate, but the two bills differ so a compromise must be reached before it is signed into law.
After the assessed values are frozen, the Farm Bureau will likely push for the state to use more up to date data in its annual formula.
“We think in the future that the data lag can be moved forward two years, which would help match taxes to a farmer’s income levels,” Hall said.
Meanwhile, farmers say they’re happy legislators are seeking a solution, but that doesn’t help their situations this year.
“To me, the bottom line is what do I have to write the check for,” Kron said. “How much per acre do I have to pay? We were looking basically at breaking even. Now, it’s quite possible this property tax bill will put us at a loss.”