Let me offer a bit of friendly advice to Minnesota farmers: Don’t get greedy, folks!
I say this in response to a bill recently introduced in the Legislature that would create yet another special treatment in taxation of farm real estate. The measure would exempt much farmland from any increase in property taxes resulting from new projects, such as a new school building, at any of the local levels of government that depend on such taxes.
The increased levy would apply only to a house, garage and one acre of land, regardless of how many acres of farmland a farmer owns.
This proposal is one of the worst examples of naked greed I have come across in a long time. And I say that as someone who grew up on a farm, who still owns farmland that constitutes a big chunk of my net worth and who has dozens of close friends and relatives actively engaged in farming.
I love and respect these people, but Minnesota’s real estate tax system is already excessively jiggered to discriminate in favor of farmland and against other property owners.
Moreover, this disparity is particularly sharp in comparison to urban business property owners, particularly those who own small retail shops and commercial buildings.
The whole system is already too complicated, with special provisions for this group or that, but with none favored anywhere as much as farmers.
We don’t need any more special deals, especially for some of the highest net-worth households in the state. Nor do we need any more complication in a jerry-rigged system.
Advocates for the bill argue that without it, some farmers “can pay up to 10 times as much” for a new school or courthouse as other property owners.
Well, cry me a river. This argument takes the euphemism “disingenuous” to a whole new level. Yes, some farmers will pay 10 times as much as some other people living in nearby small towns. But this will be true only for very large farms whose owners may have net worth 50 or more times as high as the median for home and small business owners in the same towns and counties.
To get a perspective on this, consider my 211 acres of not-very-good farmland. Its assessed value is $910,000. Given that land values are falling, that is probably close to its market value. I don’t have the tax bill for this year yet, but for 2014, I paid $2,403 in real estate taxes. Adjusted for inflation, that is up 19 percent over the last 20 years. As a percentage of the land’s assessed value, it is a fifth of what it was in 1994.
Now take a small store a few blocks up the street from my Twin Cities house. For many years a friend ran a hardware store there. He sold it and the current owners sell baby goods. It is just a typical, decades-old St. Paul neighborhood store building. Ramsey County assessed it at $306,100 for 2014 and the tax due was $12,052.
Now why should a small-business owner with a building worth one-third of my farm pay well over four times as much in real estate taxes?
Yes, farmers work hard for a living. But so do small hardware and baby supply store owners. And so do mechanics and plumbers who have garages and shop buildings. So did the family that owned the Middle Eastern deli at the end of my block before closing a few years ago. So do grain and gravel truckers. So do welders.
One may argue that the problem is over-taxation of business property and not the under-taxation of farms. But someone has to pay to support our towns, counties and schools.
If not farmers and if not businesses, then taxes will have to go up on houses. Or we will have to shift more of the cost of local government to existing state-level taxes like those on income and sales.
One may also argue that any comparison between rural Murray County and core-metro Ramsey County is inherently misleading. All right, then talk about the taxation of farmland relative to stores and garages and machinery dealer’s facilities in towns like Slayton or Fulda or Lake Wilson. Talk about taxes paid relative to income and net worth for the house owned by the woman working checkout at the a store in Slayton or the machine shop in Chandler versus my friend who farms 1,280 acres of corn and soybeans. They are all in the same county and same school district. Yet, on average, local taxes take a bigger bite relative to income and net worth for non-farmers than for farmers.
This is particularly galling since the distribution of income and wealth in rural Minnesota almost certainly is the most unequal it has ever been.
The concentration of both crop and livestock farming into fewer and much larger units has proceeded apace over the past 30 years.
The owners of these big operations generally work awfully hard. They have to be good managers or they would not have gotten where they are. And they cope with great risk.
But they are not poor people by any measure. And even when they live austere lifestyles, they are in a position to pass large amounts of money on to heirs. Nowadays, nearly any of the square miles of farmland you drive by in rural Minnesota is worth $2 million and many are worth over $5 million.
At the same time, the incomes of retirees and of wage and salary workers in rural Minnesota remain low. So are the earnings from most small-town businesses, from hauling grain to moving dirt to repairing machinery. The income gaps in rural areas have never been wider.
Certainly, not all big farms are paid for, either the land or machinery. Some are highly leveraged. But there is a lot of equity in most big operations.
Yes, there still are numerous farms of moderate size. And there are many tracts of land owned by “little” landowners like me, often absentee or retired. But, even for these, the increment in taxes from a new school or county facility is going to be small relative to the worth of the property.
The owners of the big commercial farms who can buy the big tractors or combines generally fall into the top few percent of Minnesota households in terms of net worth. They deserve much respect. They deserve fairness. The same is true for those operating only 400 acres of land or the retiree renting out 160. But that doesn’t mean they need yet another break on property taxes.