Despite Drought, Meade County Rejects Reduction in Ag Land Productivity Assessments

South Dakota’s farmers pay what we call a “productivity tax” on their land. Since 2010, we’ve transitioned from taxing farmers on the sale price of their land to the income their crops and cattle can generate. Of course, the productivity tax isn’t an income tax, because that would be too simple and fair and inimical to local Republican dogma. Instead we tax farmers based on what a complicated formula says land like theirs could have produced on average over the last eight years if they had made the best choices.

Out in Meade County, even the best choices haven’t been able to overcome drought. Meade County agricultural landholders got a 10% break on their assessments last year due to the impact of long-term dry conditions, and Meade County director of equalization Kirk Chaffee figured that productivity-baed assessments ought to drop another 29.5% this year. The commission chair agreed:

Commission Chairman Galen Niederwerder said the state needs to understand that the county is still in a drought.

“I’ve seen truckload after truckload after truckload after truckload of hay go by at $150 a ton,” he said. “That’s wiped out any profits this year for ranchers. I don’t care how good cattle prices are; there is not going to be a profit in the county for ranchers this year” [Deb Holland, “Meade County Proposal Could Lower Ag Land Values by 30%,” Black Hills Pioneer, 2018.04.12].

But on April 25, the commission rejected the reduction on  a 2–1 vote with two abstentions. Oddly, the abstainers give the quotes on why the commission turned down the turn-down:

Commission member Rausch said she believes reducing the ag land assessments would shift the tax burden to the non-ag taxpayers in Meade County.

Commissioner Seaman said the proposal to reduce the ag assessments just opens a can of worms.

“I personally don’t see how we can move on this,” he said. “I would like to lower ag taxes just as much as anybody here in the room… but I don’t think we can do it without lower commercial taxes and lowering residential taxes when people get in trouble” [Deb Holland, “Meade County Won’t Reduce Ag Land Values,” Black Hills Pioneer, 2018.04.28].

I understand that it costs just as much to pave the roads and run the jail whether farmers and ranchers are in boom or bust. I understand why homeowners and business owners wouldn’t want to see their taxes go up just because of a drought. But the basic idea of fair taxation is to tax wealth where it is. If the ag sector doesn’t have as much wealth, someone else has to pick up the slack.

If we’re serious about taxing agricultural land based on productivity, then assessments should unquestionably go down to reflect the lower productivity of years of drought. If that’s not fair enough for all concerned taxpayers, then maybe we should go the simpler route of taxing farmers, ranchers, and everyone else on their actual income instead of their calculated potential income.

p.s.: Drought has eased somewhat in Meade County and throughout the state over the past several months. According to the trusty UNL Drought Monitor, eastern Meade County was in “D3” extreme drought last September; most of the county is back down to “D1” moderate drought, while the western slice is down to “D0—Abnormally Dry.”