Farmland Preservation Through Tax Policy
In 1968 the voters of this State passed a Constitutional Amendment authorizing the State Legislature to use tax policy to protect, preserve, and conserve farm lands. The amendment was approved by 68% of the voters. It authorized the use of current use valuation, as opposed to valuation using “true and fair value.” Current use valuation relates to the productive and actual use of the land. Valuation based on true and fair value uses comparable sales data, is based on speculative use, and results in a value based on “fair market value” and “highest and best use.”
The practical reality of the 1968 enactment was a finding by the voters that farming is the highest and best use of such lands.
Over the years various tweaks and amendments and improvements have been done to the program.
Forty years ago there was a clear need for farmland preservation. The need remains, and might be even greater now. And a few more tweaks are needed so the program is effective for the demographics of today. The trend in farming is an increase in small farms, and an increase in new farmers. If the tax policy is going to continue to be meaningful it has to be adapted to these changes in the Washington state agricultural economy.
Two Categories of Farms – Small and Large
The current use program divides the farm universe into two buckets – small farms and large farms. Small farms are under 20 acres and large farms are over 20 acres.
Large farms are taxed based on the “current use” value for all of their land. Small farms are taxed at “current use” on most of their land, but not the land under the farm residence.
Both small and large farms pay tax on their structures based on the true and fair value of those improvements.
The One Acre Tax Burden is Unfair for Small Farms
In establishing the assessed value of small farms the County Assessor carves out one acre around the residence and taxes the one acre at “fair market value.” That means this chunk of the farm is taxed at the going price for lots and developments and residential acreage. And because many small farms are on the urban fringe, in developed areas, or in areas of sprawl, these “one acre” lots inside the farm come with a hefty tax assessment. The hefty tax assessment increases the cost of doing business. Small farmers are small business and this property tax treatment has a significant impact on their ability to compete.
Taxing the land under the farmstead does not make sense. And it is not fair. There really isn’t a one acre lot within the farm. And there really isn’t a one acre piece the farmer can sell. Large farms obviously depend on the land under their farm house to operate their farm and small farms do too. They should be treated exactly the same.
We Need Small Farms
This issue impacts all of us. If the small farmer can’t afford to live on his or her farm, they just might not farm. The contribution of small farmers is a benefit to all of us, and we cannot afford to be without them.
Lets fix this. The legislature can address this issue with some simple language, and it won’t cost very much. The proposal just provides the exact same tax treatment to small farms that large farms have today. The land under the farmstead will be taxed at current use, instead of being taxed as a residential one acre lot. This will reduce the cost of doing business and will keep small farms in business.
Take a look at the table in the Summary, which shows that if the proposal is enacted the average homeowner in King County will pay an extra 53 cents a year, while the average homeowner in Spokane County will pay an extra $1.72 a year. In addition, taxing districts will experience a small loss. This is a small investment for individuals to make for a big return. Like residents all over the state, the people of King County and the people of Spokane County appreciate farmers and value their contribution to the local economy.
Lets stand by the principles of preservation and protection. We can provide an environment in which farmers can stay in business. Lets think outside of the farm.