Indiana's biggest property tax reform in 35 years was signed into law in March 2008. "This is huge," says Larry DeBoer, Purdue University agricultural economist and an expert in public policy. "But it provides relief for homeowners almost exclusively—not landowners."
DeBoer explains that farmland, unlike other property, is not assessed on a prediction of selling price but on use value. A farm acre's assessed value is based on earnings from agricultural use, not on its potential value for development. The calculation includes yield, commodity prices and land rents—all of which are up—and interest rates, which are down. "This calculation has caused an increase in the base rate per acre, which is the starting point for farmland assessments," says DeBoer, whose Local Government Information Web site contains a wealth of property tax information.
Farmers got a break last year because the Indiana General Assembly froze the base rate for 2007 to match that of 2006, which was $880, DeBoer says. Then, the base rate jumped 30 percent to $1,140 per acre in 2008. If legislators hadn't frozen the base rate, we still would have had an increase—just in smaller increments.
According to DeBoer, farmland owners can expect a base rate of $1,200 for taxes in 2009 and about $1,350 for taxes in 2011. In just four years, from 2007 to 2011, the base rate is predicted to increase 53 percent. "You can count on higher farmland assessments for the foreseeable future under the current system," he says.