Farmland fallacy

" So what is the true value of a piece of land? That depends on how much net income could be generated"-- this doesn't sound right. Seems a bold and misguided statement. Can anyone out there argue that it is correct?

The amount of income that can be made from an acre of land is certainly a big factor. A second factor is the expected value of the land going forward. If you expect land prices to increase, then you would pay more for it. A third factor is the investment alternatives. With interest rates for CDs and govt bonds at all time lows, anything that produces income is better that those investments--thus, the rising stock market, rising land prices, and rising prices for art and collectibles.

JG

Ok - let me explain. - Farmer A owns 100 acres next door to Farmer B who also owns 100 acres. Farmer A is a lazy guy: he wakes up late, hardly does anything , and could care less about how well his farm does. His 100 acres of land produces 20 bushels of corn. He loses money. Farmer B wakes up early, goes to bed late and puts every humanly possible effort into making his farm productive. His farm - miraculously - produces 100,000 bushels of corn and he makes $200,000.00. What a farmer he is! Now - At the end of the year - farmer A pays no taxes on his farm because - well - it just wasn't earning anything. Farmer B ends up paying a huge amount of property tax because he was so extremely successful. The slug - farmer A - gets a reward. The great farmer - farmer B - gets penalized. Isn't this what Lyle Wilcox is promoting?

Hey, bob s, you just explained how income tax works!!!

Except farmer A then gets tax credits to spend on drugs!!!

Well, OK then!!!!

Bob s, What Lyle is promoting is valuing it on the potential the land can earn rather than what it actually is earning.

1 option is:

Farmer A would pay a similar amount of tax as Farmer B despite not making anything due to the potential it could make.

A 2nd option

Farmer A really isn't farming the land he pays taxes based on the market value of the land which is probably going to cost him more than the farm rate. If farmer A sold the land to Farmer C, and Farmer C is actually farming the land, Farmer C would have to petition to have it taxed at the farm rate rather than the market rate.

People,

the simplcity of this should be obvious.

Taxes on the land itself is the only form of tax that is based upon nature. all other forms of taxes are based upon the ability of the person to pay.

In example:

1. income tax is based upon what you have earned throughout the year.

2. Sales tax is based upon what you have purchased.

3. personal property tax is based on item you have managed to purchase.

4.automotive tax is based on the value of the auto you have purchased.

5. even improved property tax (with houses or buildings) is more fair than farmland as someone had the money to put the buildings there.

With farming a great deal of your net at the end of the year is a matter of mother natures decisions. Yes there is some skill involved. But more than anything the weather is the deciding factor in your net profit or loss.

It is like having a $100k per year job and paying $30k in taxes one year and the next year losing your good job and having to take one for $40k but still owing $30k in taxes. No one would stand for this but this is what is like exactly for the farmer.

unimproved property tax should be totally abolished. PERIOD.

Basing property tax on how much you earn isn't any good. What would happen is that it would spred.If a homeowner is unemployed - then they too probably would not have to pay property tax. No income - no tax. In Detroit Michigan now there is a move to have it so that water bills are based not so much on how many gallons you use , but on how much you earn or how much money you have. So that your cost for 1,000 gallons of water would depend on your wealth. There's just too much of this sort of thing going around. You don't want to start looking at people's wealth or income to determine their property tax - or even their water bills. It may have a nice sound to it now - but it would end up just another poorly conceived and abused socialist mess. That's the problem with the idea.

All taxes are socialist in nature, this is a basic political concept. all I ask is for taxes to based on ability to pay. property taxes are definitely not. I once saw a sale bill for 4 sections of colorado grassland/pasture. the property tax on 2560 acres of ground in southwest colorado was only $900 the same in nebraska would be close to $25000. We need to change to a fairer way to create revenue for our common needs

I see your point - I'm against looking at someone's income or wealth and using that as a basis for property taxation. All other things being equal. I think I explained that - maybe not. I'm not again farmers saying that their tax amount should be lower. I'm not against the people of Nebraska saying the tax on gasoline is too high and needs to be lowered. I would be against some people paying no gas tax because they don't have a certain threshold of wealth - but others paying the gas tax because the have more wealth.

Very interesting to say the least. So, if Mr. Farmer makes good money, he is subject to higher taxes on his land. The way Mr. Wilcox is talking, no one could make any money and get ahead. Penalize the ones who have good intentions.

OK then, maybe it should be like houses sold in the city. You buy a house for $45K and three doors away a house is bought for the same amount of money. Keep the house for a year or so, paint it, clean it up real good and put it on the market to sell. The place is no different than yours in size and what is in it. It sells for almost double the price. Your house goes up in value and that taxes go sky high just because someone set an example of selling a house. Is that the way land should sell and how taxes should be levied??

Should people be penalized for having good luck in life to get ahead?? Mr. Wilcox lives in a nice place. What would he say if his taxes doubled because of his good luck in money?? I think he would raise a stink over that.

From what I can gather, in Nebraska 100 acres of land is reaching over $200,000.

With the current system, the Tax value of land is based on that $200,000. It doesn't matter how much the farmer makes off the land or how much he spends on the land. The value is $200,000.

Now say that there's a rush of people looking to buy land in Nebraska and it starts to push the value upto $500,000 for 100 acres. The farmer is now paying taxes based on a land value of $500,000. Even if the farmer is still making the same amount of per acre, his tax bill more than doubled.

What Mr. Wilcox is proposing is changing the taxes on land to potential income value. If the price of land is 100,000 per 100 acres or 500,000 per 100 acres, the tax would be the income potential, which will pretty much always be less than the sales value.

As Lyle pointed out, the current land value would be 40,000 using this method.

You could even take the last 5-10 year income average and help take care of some the swings from year to year.

Also, when the vast majority of the state is unimproved land, I doubt not taxing is not going to go over well.

you all are missing the point. the farmer is being taxed upon the potential of the land. how would you like to be taxed because your potential is 250k per year instead of the 45k that you make?

the system should be based upon income or sales. it is the truest measure of who is being successful or at least able to pay.

I am certain the reporting of commodities harvested would be accurate. We all believe in paying our fair share.

hulapopper, the mere reporting of commodities grown is not indicative of the value of the land if it takes more money in inputs than what is received in return. As I understand the cost of production on irrigated corn is approaching $700 per acre. Break even at 190 bu per acre this would $3.68 per bushel. The cash price this morning is $3.33 November delivery. As you can see even producing an average production is no guarantee of ability to pay.