Farmers have plenty of hurdles each growing season. Weather, insects, plant diseases, rising input costs and commodity prices.
But the one thing they rely on as the foundation of their passion has an out of control tax problem – their land. Farm land has a complex taxation situation that has grown over the years forcing farmers to pay larger tax bills.
In 2016, a group of Leflore, Sunflower and Holmes County farmers came together to form the Mississippi Property Tax Alliance (MSPTA), Inc. to make revisions to taxation. The group of volunteers sponsored legislation in 2017 to help slow the annual increases in tax values and continues to work on other legislation and ideas to simplify farmland and timberland taxation procedures that were implemented in 1990.
According to the association, Mississippi has uniform taxation across all classes of property with farmland being Class II property. Property is taxed based on its use on January 1 each year. The Mississippi Department of Revenue computes a three-year moving average of net income on each of the five soil classes in each of the seven land resource of the state.
Net income is derived from average yields, average market prices and costs of production from MSU budgets. Crops grown on at least five percent of the acreage in each area are used in computing income for the soil classes. The net income is then capitalized at a ten percent rate to determine the Agricultural Use Value for taxation. For example, $200/ac. net income divided by .10 = $ 2,000/ac. 15% of that value becomes the assessed value and the county millage rate determines the tax owed.
This is a use value and not a market value. In comparison, homes are appraised at market value by the county tax appraiser and taxed on ten percent of that value.
Some counties have taxes of $29 to $60 per acre on the better soils. This has become a burden to owner/operator farms and absentee landowners who are getting a lower return on their land.
High taxes also affect market values and impact marketability of land in some areas when compared to lower farm tax states like Arkansas with $4-8/acre and Louisiana at $3-4/acre.
Association president Harry O’Neal, directors Bob Morgan, Jim Thomas and Executive Director Mary Annette Morgan Smith helped explain the situation farmers constantly face with rising farm land taxes.
“State law and administrative tax calculation formulas increased land values for taxation in most geographic tax areas of the state by ten percent a year compounded since 2002 and in all areas from 2009 to 2017,” Morgan says. “We’re still looking for ways to simplify the whole process.”
The MSPTA has been working on legislation.
“We did get some legislation passed two years ago to slow down some of the increase in the property values that we had seen,” Morgan says. “We had support from Farm Bureau and other groups. These are just our first steps.”
The legislation brought the rate of increase or decrease in values to four percent from its ten percent rate statewide beginning in 2018. With the mounting increase each year, farmers have to pay larger taxes each year despite what they make off the land.
“When you see $30 to $60 dollars per acre fixed cost in taxes before you do anything on the property, buyers are going to look at that very closely and see if it’s a business decision they need to make,” Morgan says.
Increases in taxes may continue but MSPTA is trying to slow down the increases and allow for declines if farm income falls. The association continues to have meetings with landowners across the Delta and the state to educate and recruit more help to battle the growing tax problem.
“Rising taxation is a statewide concern,” Morgan says. “Generally, taxes were increasing ten percent every year and taxes were doubling every six to seven years. It becomes a big expense to your farm or reduces your return on investment for investment property. It’s becoming a burden. We’re trying to slow down these increases so farmers can better project and manage their expenses. Also, proposed legislation keeps land leased for hunting and fishing as agricultural land.”
Land taxes are due in December each year and have become a large expense for many farms. Larger taxes may send those looking for land to other states.
“Arkansas and Louisiana have much lower land taxes and when folks are looking to buy land they are going to look at Arkansas and Louisiana,” Jim Thomas says. “It puts our land at a disadvantage.”
Morgan feels, “It’s putting a cap on our land values. Its restricting the buying and selling of land in Mississippi. Land owners who rent out have to factor that cost to the renter if they can.”
The whole ag economy is hurt because of the tax increase according to Mary Annette Morgan Smith.
The association leadership includes O’Neal as president and directors John Bush, Clint Dunn, David Grossman, Charles Kimble, Terry Maxwell, Morgan, Milton Parrish, Jim Thomas and Smith.
If anyone would like to become a member, contact the MSPTA through their website at www.mspropertytax.org.