HANCOCK COUNTY — Mike Merlau has gotten used to it: Every year, he sets aside a quarter of the income from his 200-acre farm for property taxes.
But this year marks a change for Hoosier farmers like Merlau, as farmland property taxes have decreased for the first time since 2006.
Legislation enacted last year changed the way the value of farmland is calculated, putting in motion a gradual lowering of an acre’s worth and providing relief to Hoosier farmers who struggled to pay rising property taxes as their crop prices dropped.
Filling the gap will fall to other property owners in the county, but experts say any increase will be minimal. The average Hancock County homeowner should see an increase of only about $10 to $15 per year on their tax bill.
For Hoosiers in counties where farmland represents 50 percent of the tax base, such a change would place a higher burden on other taxpayers, including homeowners and businesses, said property tax expert Larry DeBoer, who teaches economics at Purdue University. That could in turn impact the money able to be taxed by local cities, towns and townships, he said.
Hancock County is too suburban, with too many high-priced homes, to see such a blow dealt to those taxpayers, DeBoer said. While farmland is valued at about $338 million in the county, that represents just 10 percent of the about $3.4 billion in taxable property.
In Hancock County, the changes are estimated to cause an approximate 1 percent increase in property taxes paid by homeowners and business owners, DeBoer said. For example, a Greenfield resident whose home is assessed at about $150,000, whose yearly property tax bill is about $1,479, that 1 percent increase would raise the bill by $15, DeBoer said.
The new law lowered the tax per acre of farmland from $2,050 in 2016 to $1,960 in 2017, DeBoer said. Lawmakers adopted the changes because corn and soybean prices dropped in the last five years, while property taxes on farmland continued to rise, cutting into farmers’ bottom lines, DeBoer said. Part of the problem was the formula for calculating taxes used 4-year-old crop price data, he said; now, it is updated to 2-year-old data.
Experts predict farmland will be assessed at about $1,850 an acre by 2018, DeBoer said.
Farmers are grateful for the change, said Katrina Hall, director of public policy for Indiana Farm Bureau.
In the last five years prior to the change, farmers had seen their property taxes increase by about 40 percent while other taxpayers’ rates stayed the same or decreased, she said. Four-year-old crop prices were dictating farmers’ property taxes, while the real crop prices were much lower, officials said.
“There was quite a bit of concern and frustration on the part of Indiana’s farmers,” she said.
The new legislation approved last year also ensures the value of farmland doesn’t increase or decrease too quickly year to year, she said.
In Indiana counties with more acreage dedicated to farmland, the effect of that decrease in assessed value is expected to be felt much more sharply by other property owners, DeBoer said.
For example, nearby Rush County holds 45 percent of its tax base in farmland, meaning property and business owners are looking at an increase of about 5 percent per year on their tax bill, DeBoer said.
While farmers are appreciative of the first year of decrease, they say the expected drops in the coming years will be most beneficial.
Merlau, who owns some 200 acres located in Sugar Creek Township, feels this year’s $1,960 per-acre assessed value is still too high.
“It puts a strain on farmers,” he said. “It’s a shame you have to pay so much to keep something you already own.”
The calculation used to determine how much property tax is owed on an acre of Indiana farmland has changed several times in the last decade. Here’s a look at the past and projected base rates for the value of farmland per acre: