Indiana farmers could face property tax increases because of record commodity prices during the 2007 and 2008 seasons.
Purdue University economist Larry DeBoer said the state taxes farmland based on use value instead of market value,
a system that’s also in place in other states and is designed to keep assessments fair for all farmers. That means the value
of the land is determined by the amount of income it produces.
Taxes are figured using a special formula that starts
with a base rate determined by a dollar amount per acre set by the state and factors in soil productivity and influences like
frequent flooding or forest cover.
Indiana Farm Bureau president Don Villwock said the formula is based on a six-year
average. Farmers haven’t seen a large spike in property taxes since the formula was developed.
But the high demand
for ethanol in 2007 and 2008 sent commodity prices to a record level. As a result, farmers will pay taxes for several years
based on those high prices if the formula isn’t adjusted.
Villwock said no one predicted the record prices when
the formula was set.
"There was really not much variation from year to year during those economic times,"
he said. "So the formula was fair and acted as a good indication as to where our incomes were headed. But, because of
the uniqueness of the 2007 and 2008 incomes, the formula really distorts what is a normal farm income. … It’s very cruel
in the fact that the taxes are going up and income is going down."
DeBoer said farmers fear the base rate
per acre could nearly double from $880 in 2007 to more than $1,600 in 2012.
Villwock said the Farm Bureau is talking
with state lawmakers and discussing possible solutions.
One idea would be to create an Olympic-style average in
which the high and low years get dropped. Another would be to cap the amount the formula would be allowed to increase in a
Villwock said farmers want to see changes made.
"We are all a little uneasy what the formula
might predict or what it might make our property taxes in the future," he said.