High Property Taxes Weigh on Farmer Spreadsheets

April 7, 2016 03:30 PM

Farmers are carefully evaluating each added cost this year. It’s been a battle for some trying to reduce cash rents this year when real estate taxes on farmland and pastureland remain steady or higher in some states.

For example, in Nebraska, there’s a battle between urban and rural lawmakers about property taxes. The state legislature is in talks about a package that would include some income tax cuts. After years of supporting some tax credits for Nebraska’s farmers, some urban lawmakers say other residents "aren’t getting a fair share" and farmers "chose their profession." Meantime, those supporting ag say farmers are in a "world of hurt."

Producers around the Corn Belt are watching their costs this year, but some farmers are penciling in an extra expense.

“Our real estate taxes on farm ground here are ranging from $70 to $110 an acre," says Nebraska farmer Bob Bartek. "So, it’s really a big issue for farmers here. Our real estate taxes on farm ground here are about three times higher than Iowa."

Experts say rising property taxes are weighing on some producer’s spreadsheets.

“Some farmers in some states are paying 50 cents a bushel for corn for property taxes," says Creighton University ag economist Ernie Goss. "That’s one-seventh of the price of the bushel of corn. It’s making it tough. Some of the states, particularly Iowa and Nebraska, we’re seeing a real concern about property taxes and how much farmers are paying there."

LandOwner newsletter editor Mike Walsten says some places, such as Illinois, have rules in place that limit the amount property taxes can go up each year. Some states like Nebraska and Ohio are seeing slight to high property tax increases.

“In Nebraska, which is a low population state, the state has no income tax but not a lot of people. Property taxes have been going up dramatically for quite some time. There has been a 17% to 20% annual increase over the past several years," Walsten says. "Ohio is also seeing sharp upward revisions in property taxes as well. In some cases, the taxes are going up 200% or 300%."

Walsten adds that farmland values peaked in 2013 and have fallen the last few years, but property taxes have continued to rise sharply in some states, including Nebraska and Ohio. Cash rental rates are coming down as well, but not as much as farmers hoped.

“It looks like cash rental rates are down 5% to 10% on average across the board," says Walsten, who expects that level of decrease in 2017 as well. 

Not surprisingly, property taxes are creating difficult discussions for farmers and landlords when negotiating cash rents.

“I have a lot of landlords whose real estate taxes on farm ground is going up, and they’re saying to me how they can’t make money," Bartek says. "They (admit) it’s hard for us farmers--since our prices are down--to give them an increase in their cash rents. But they still ask for those increases since their property taxes went up so much in the last three years."

Even though farmland values have come down, these farmers say the biggest challenge may be making profits during a year when net farm income is half of what it was in 2013.

Walsten says a survey on cash rents conducted last fall by LandOwner showed that 75% of producers said they contacted their landlords to request a decrease in cash rental rates. A follow-up survey in March found that 54% of respondents actually received a reduction in their cash rent rates.

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Spell Check

Chappell, NE
4/8/2016 09:39 AM

  Leave it to the brainiacs in the Nebraska Legislature to be the only ones EVER to figure out a way to LOSE money on marijuana. But don't worry, they will just raise the taxes on our farmers which has been their ONLY solution to every tax problem. Get a clue, bozos.

Western, NE
4/8/2016 09:31 AM

  Property taxes and property insurance in Nebraska are getting confiscatory. Yet our legislators will not look at rewriting the school funding law TEEOSA that unfairly shifts the support of rural schools to property owners while Omaha, Lincoln and etc. cities in Nebraska are supported by everyone's income taxes in addition to the paltry property taxes those cities pay. It's tough to expand, try different methods of ag (read as research and development) when there's no money left after you pay your property taxes and insurances.

Just the Facts
Buffalo, NE
4/8/2016 11:23 AM

  Many rural school districts are getting $0 or effectively $0 in state aid today, yet Lincoln schools enjoy state aid of over $3,000/student, Omaha gets over $4,000/student and Grand Island gets over $5,000/student in state aid. Why doesn't every school district deserve a minimum level of state aid no matter what their 'local resources' are? Unless the Governor passes some state aid dollars to rural school districts, none of his proposals will reduce property taxes in these rural districts which have a predominantly ag real estate tax base.


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