The Small Farms Proposal is Good Tax Policy
The legislature will soon be considering if the existing tax policy regarding small farms is fair, and if it is not, what to do about it.
This will be a complex policy discussion and a thoughtful one. When HB 1437 and SB 5327 come up for a hearing many issues will be raised. There are plenty of reasons the small farms proposal is good tax policy. But nothing is obvious and there are arguments on the other side. To get ready for this general discussion lets start with some building blocks.
Tax Policy – Making Choices for Fairness
What is tax policy? Politics and policy making are about making choices. Tax policy is about making choices regarding taxation. Nothing is perfect, and tax codes are not perfect. Their imperfections are addressed through exemptions, credits, deferrals, and other methods to adjust their impact. For example, the state legislature enacted a law many years ago to take the state and local sales tax off of food. That makes good sense. Likewise, the state legislature has enacted a statute providing unique taxation for manufacturing, because that keeps this state competitive. And the people through a Constitutional Amendment decided that farmland is different from other land.
In 1968 we made adjustments in the tax code to reflect the pressures on farmland. This is the current use progam, which is the subject of HB 1437 and SB 5327. The current use property tax progam has an enrollment of over 12 million acres of farmland. Those 12 million acres are a good measure of the success of this program to date. Some of these acres are at risk of leaving the program because of unfair treatment in the tax code. For more information on the issue for small farms, see “Think Outside the Farm” on this blog.
Farmland Preservation is a Hot Topic
Farming continues to bubble up in policy discussions, and for good reason. Throughout the state County Commissioners, County Executives, and City Mayors are taking stands on farmland preservation. Why now? Because so far we as a State have not been able to maintain our farmland base. Farmland is being converted to other uses on a daily basis. This is a pressing issue for a number of reasons, top among them quality of life. By quality of life I don’t mean electronic gadgets and big screen TVs. We are talking clean air, water, and access to food. Food for families, for schools, for farmers markets, for restaurants, for food banks, and on and on. Food and farming are inextricably linked.
Tools for Farmland Preservation
There are a number of ways farmland is preserved. Some farmland is purchased outright by government or nonprofits and leased back to farmers. Some governments or nonprofits purchase development rights in order to preclude any possibility the farmland will be converted to residential or industrial uses. Land use planning and zoning are also used to preserve farmland.
The Current Use Farm and Agricultural Program is another way to preserve farmland. For information on this program see the Resources page in this blog. Farmland enrolled in the Current Use Program is taxed based on how it is used – which means it is taxed as farmland, not as potential residential or industrial land. This is huge. And it works. It keeps farmers farming, and it keeps the land in private hands. The current use program is a good way to keep stewards on the land and to reduce the cost of governmental services to the land.
None of these tools are free, but the investment is crucial to farmland preservation.
Today’s Current Use Farm Program is Not Perfect, Nor Fair.
SB 5327 and HB 1437 address the imperfections in the existing law. In a nutshell, small farms do not get current use valuation for all of their land. Instead an entire acre (which is a big chunk of a small farm) is taxed at fair market value. This one acre is carved out around the farmhouse. Fair market value for this land is not reasonable because it is being used for farming, is not being developed, and fair market value is based on the surrounding developed land. For more detail see “Think Outside the Farm.” It all boils down to fairness for program participants and effectiveness of the program. Small farmers are working hard to compete in the marketplace. They compete nose to nose, and hoe to hoe, with large farms on many products. We need to make the competition (and tax code) fair and provide the same tax treatment to all farms, large and small.
SB 5327 and 1437 Fix a Real Problem for Real Farms
If the Current Use Program is aimed at preserving and maintaining the farmland in this state, then lets update it so that we keep small farmers farming. Small farms are real, they offer meaningful work, food security, and income to the residents of this state. The presence of small farms in our communities and landscape is something we can no longer take for granted. Its common sense.
What You Can Do – Communicate.
There are innumerable milestones in the legislative process and each step requires input and work.
Go to the Status page for information on what to do next. Reach out to friends and farmers and tell them about this issue. Talk to the local government officials where you live. Your County Commissioner and County Assessor need to hear from you. The current use program is an important state-wide program, but it translates into results in communities. What you think makes a difference.
We will update the status page on this website regularly. And don’t forget to thank the sponsors of this bill, Senators Fraser, Hobbs, and Becker, and Representatives Reykdal, Blake, Haigh, Orcutt, Lytton, and Van de Wege!