Be Thankful Land Tax Rate Increases Aren't Higher Than They Are!

Change in legislation a year ago provides some damper on steady increase in rates.

Published on: Feb 7, 2012

If you just read how quickly and how high property tax rates for base assessment of farmland in Indiana could go in the next three to 10 years, you probably need good news. The good news is simply that without the legislature stepping in last year, the increase would be even higher, and would be projected to increase at a faster rate in the future.

Larry DeBoer, Purdue University Extension ag economist, says that's because the General Assembly changed the formula in 2011. The basic formula remains the same, but now when the Department of Local Government Finance figures the value of bare land for assessment purposes based on a six-year rolling average of factors related to commodity prices, costs and interest rates, they subtract the highest year and only use five numbers instead of sis. Taking out the year with the highest numbers helps put the brakes on the steady increase in rates, if only by a relatively small amount.

The amount is actually larger than you might thin, De Boer says. If the highest value hadn't been dropped in figuring the base rate, it would have been $1,570 per acre for 2012, not $1,500, DeBoer says. It amounts to about a 10% decrease in the base rate.

A high year, 2007, when the ethanol boom began, was dropped from the calculations for 2011 taxes. However, for 2012 taxes 2008 data rolls into the six-year rolling average formula, always four years behind, and it becomes the highest value of the six years. So it falls out and the still relatively high value from 2007 stays in, creating the increase. Without the change made last year, with both 2007 and 2008 included, the result would have been a base tax rate per acre of bare ground about 10% higher than what it will be, as noted earlier.

Indiana Farm Bureau was instrumental in convincing the Indiana General Assembly to take some action to help property owners of farmland a year ago. Homeowners were getting relief, but not those who owned bare farmland. Rather than tweak the formula in some other way, the agreement passed a year ago was to take the highest year out of the six-year formula, and calculate the base rate on the five remaining years.