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Novstrup: Rhoden and Noem Imposed “Broken” Tax System

Senator Al Novstrup, Senate floor, 2018.02.21, screen cap from SDPB.
This is how hard Senator Novstrup has worked to fix the “broken” Rhoden/Noem ag productivity tax.

LEAD South Dakota held Aberdeen’s first Legislative candidates forum of this general election season yesterday. Despite maintaining radio silence all summer and not sending an RSVP to LEAD’s invitation, Senator Al Novstrup did deign to attend. My senator prefaced his appearance by limply shaking my hand and literally getting in my face with a bitter and petty personal attack (the Novstrup men really are brittle, angry creatures with no tolerance for challenges to their entitlement). Why our sixteen-year legislator gets so mad at me escapes me; as the conversation we had with voters after Al regained his composure demonstrated, his real anger should be with Kristi Noem and Larry Rhoden for saddling South Dakota farmers and ranchers with an unfair and “broken” tax system.

Among the handful of voters (pretty much the same people who show up at all our of local Legislative events) was Tim Even, who asked about Brown County’s illegal five-million-dollar overassessment of farm land over the past five years. Hundreds of ag landowners have paid this year’s property taxes under protest, meaning that money sits in a trust account until the protest and the accompanying lawsuit are resolved. He wanted to know if the state bore some responsibility for refunding farmers’ money. I said I’m not sure the state can be made to pay for Brown County’s mistake, especially since the state never touched the money in question. Senator Novstrup seemed to blame the state for approving Brown County’s assessments.

At the invitation of us candidates and the moderator, Republican candidate for Brown County Commission Mike Wiese spoke on the property tax situation. He handed each of us candidates printouts of the county-by-county property tax data that I reported last month. He also produced a table on Brown County specifically showing that, since the enactment of the ag productivity tax, Brown County has supported a 29% increase in property taxes entirely on the backs of farm landowners while actually lowering the total assessment on home and business owners:

Year 2010 2017
county levy 4.537 3.436
ag taxable value $671,069,382 $1,869,951,757
ag taxes paid $3,044,642 $6,425,154
residential taxable value $1,133,367,116 $1,418,412,111
residential taxes paid to county $5,142,087 $4,873,664
commercial taxable value $576,862,490 $753,778,579
commercial taxes paid to county $2,617,225 $2,589,983
Total county property taxes paid $10,803,954 $13,888,801
Ag % 28.18% 46.26%
Res % 47.59% 35.09%
Comm % 24.22% 18.65%
Table Source: Mike Wiese, 2018.08.25

Wiese derided the current ag productivity system as a “deferred income tax” that hits farmers with higher taxes when they can least afford to pay them. I agree completely, as do many farmers and ranchers; it would make far more sense to tax farmers based on what they actually made this year rather than what state mathematicians speculate those ag producers could have made based on income they made and spent years ago.

Senator Novstrup repeated what he said two years ago on the campaign trail, calling the ag productivity model “broken” and saying he’s long been the biggest opponent of that broken system. But in two more years in the Senate, that biggest opponent hasn’t done anything to fix that broken system. Novstrup’s son David helped kill a proposed study to reform the ag productivity formula in 2015, and Novstrup’s Republican Party quashed efforts to study and improve the formula before it kicked in in 2010.

Novstrup probably hasn’t done anything about this unfair, broken tax because he doesn’t want to hurt his relationship with the powerful Republican progenitors of this unfair broken tax. Back up to the originating legislation, 2008 House Bill 1005, and the subsequent revisions, 2009 Senate Bill 3, and whom do we find at the tops of those bills? The same people we find at the top of the Republican ticket in 2018: Larry Rhoden and Kristi Noem. Rhoden and Noem both sat with Novstrup on the 2007 interim Property Tax Assessment Study Committee that brought us this deferred income tax. Rhoden and Noem appeared as sponsors on both of the big bills in 2008 and 2009 that enacted this “broken” system.

So Al Novstrup is telling us that the people his party has nominated to lead this state have saddled farmers and ranchers with a “broken” tax system. And Novstrup himself hasn’t sponsored a single bill in the last two years aimed at fixing the broken Noem/Rhoden ag tax system. Novstrup even voted against 2017 Senate Bill 7, a measure making minor revisions to the ag classification criteria that his colleagues passed overwhelmingly.

I understand Novstrup’s inaction. He’s caught between the inescapable fact, demonstrated by Wiese’s figures, that the ag productivity tax unfairly burdens ag land owners and the uncomfortable reality that the Republican leaders with whom Novstrup treasures his clubby relationships built that broken tax and don’t want to admit the harm they’ve done to farmers.

The solution here is obvious. We can spare Novstrup and farmers further pain by keeping Noem and Rhoden out of the governor’s office, removing Novstrup from the Senate, and electing Democrats who won’t hesitate to fix our broken tax system.

Related Reading: Democratic candidate for governor Billie Sutton just released his agriculture plan, titled “Planting Seeds for Growth.” It includes this vow to take action on the broken Noem/Rhoden tax on farmers and ranchers:

Tax policy shouldn’t dictate farmers and ranchers plans for their land. The current system of taxation on ag land is driving landowners to break up native grasslands and part with their vision for their own property because it’s being taxed based on “highest and best use” and rather than the “actual use.” The Legislature has studied the issue for years and have failed to enact meaningful changes to give landowners relief from annual, steep increases. Sutton believes it’s time to act. It falls upon all of us to promote a fair and equitable tax system; taxation based on actual use would do a lot to achieve that goal and would help alleviate some of the costs of doing business for our state’s landowners [Sutton campaign, “Planting Seeds for Growth,” retrieved 2018.08.24].

See? Elect Sutton Governor and some do-something Democrats to the Legislature, and we’ll get to work on the “broken” ag productivity tax.

34 Comments

  1. grudznick 2018-08-26 08:15

    Mr. Sutton is saying that if you live in a mansion but only hold small breakfast parties and leave half of the rooms dark then you should be taxed like the fellow down the street in a 3 bedroom ranch dwelling, or if you buy a Ferrari but promise to only drive it like a Volkswagen you only have to pay Volkswagen cheap taxes.

  2. OldSarg 2018-08-26 08:32

    Good analogy. . . I still agree with Sutton. The land “owner” owns the property and should have the right to use it as the owner see’s fit and be taxed upon the present usage. The really truth is the term “owner” is a misnomer as; if you don’t make payments too the government they will take it from you which implies the suppose “owner” isn’t really an owner if it can be taken away. A good example of this was when, on a whim, Pine Ridge shut down their only grocery store in 2012 because they didn’t like the owner. Talk about shooting themselves in the foot. . .

  3. Cory Allen Heidelberger Post author | 2018-08-26 08:40

    OS recognizes the key words in Sutton’s plan: actual use versus highest and best use. Taxing land based on what the government thinks we should do with it stinks of socialism. That would be like saying, “Well, you have a law degree, so you should be lawyering. By choosing to be a welder instead, or by choosing to stay home and raise your kids for a few years instead of working, you’re not putting your income-earning skills to their highest best use. We’re going to tax you on the $150,000 you could have made as a lawyer instead of the $60,000 you made as a welder.” That’s the broken tax system Noem and Rhoden brought us. That’s the broken tax system Novstrup complains about but does fix. That’s the broken tax system Governor Sutton and I are willing to fix.

  4. OldSarg 2018-08-26 09:24

    No Cory, Noem and Rhoden didn’t bring this problem to you. This problem has existed for generations and well before either of them were even born.

    If you really want to make positive changes Cory you don’t shouldn’t just point fingers at others falsely blaming them. Just present you best ideas. To blame Noem and Rhoden is silly and too many people know the truth that the system has been broken a long time to hide behind pointing at others. It makes you sound petty.

  5. OldSarg 2018-08-26 09:54

    jerry, yes they have one now but that doesn’t erase history and in there case of Pine Ridge, history keeps repeating itself with every new election.

  6. jerry 2018-08-26 10:03

    Rhoden is guilty as indicated in your reporting Cory.

    “The task force’s chairman, Sen. Larry Rhoden, R-Union Center, argued against collecting the additional data at this time. He said it’s better to let the system start to work.

    Rhoden further warned that the data could merely fuel the arguments of opponents who fought against the new system when it was approved in the 2008 and 2009 sessions of the Legislature [Bob Mercer, “Tax Boost Likely on Ag Land,” Pierre Capital Journal, 2010.11.09].”

    You and Mr. Mercer have an uncanny ability to report the facts. A lot of folks might disagree, especially if they are Russian bots, but for the rest of us, the reporting is spot on.

    Rhoden, Novstrup and the rest of the Duma legislature in Pierre could change this “taxation without representation” scheme very quickly by enacting a state income tax to stop the regressive plans they have wrapped themselves around.

  7. jerry 2018-08-26 10:06

    You are clearly not a landowner nor a business person to not understand what a lease agreement is. They must not have those lease agreements in Russia. Your handlers should allow you some leeway to kind of bring yourself up to speed in these matters.

  8. Jake Kammerer 2018-08-26 10:57

    I’ve never been able to understand why the Ag sector on SD was so adamantly opposed to s state income tax! ALL taxes are payed from income… Currently the government tells you what you should raise for crops ( ‘best use’). This is precisely the socialist thinking Repubs have used as a club against Democrats for decades now–and it’s been solidly backed by Republican South Dakota legislatures for years now. The hypocrisy is amazing isn’t it? Ag property tax is going to really hit farms and ranchers this year after Trump’s tariff fights have dropped crop/cattle prices to record lows.

  9. Rorschach 2018-08-26 13:32

    OldSarg, you are mistaken when you say, “No Cory, Noem and Rhoden didn’t bring this problem to you. This problem has existed for generations and well before either of them were even born.”

    The ag property tax valuation system is a recent creation passed in bills sponsored by Noem and Rhoden just as Cory says. Prior to that change, ag property was taxed based upon market value just like homes and businesses.

    Novstrup did oppose the change from market value property taxation of ag land, and he was the most vocal opponent of that change. But he opposed it because the change was designed to give farmers a tax break and shift property taxes from farms to homes and businesses. And the change was done at a time when farmers were making money hand over fist. Those who weren’t farmers believed the change was just a bunch of millionaire farmers who didn’t want to pay taxes who were pushing for the change. And for the first number of years it did produce tax cuts for farmers making money hand over fist.

    Now though when times are tough for farmers and Trump has helped kill commodity markets those same farmers who got such a good tax deal before are still paying based upon the fact their land is highly productive – even though those bumper crops aren’t sending a lot of money into their pockets. The bottom line is that the system is in fact broken for one reason or the other.

    Still another point is whether school funding should be based so heavily on property taxes. Under that system it is easy to argue that farmers are paying a disproportionate share to educate everyone’s kids. But that would be the case regardless of whether ag land is taxed based upon productivity or market value.

  10. Porter Lansing 2018-08-26 14:10

    Thank-you for that perspective and insight, Rohr.

  11. OldSarg 2018-08-26 14:30

    Sorry but I’m right. Cory said: “That’s the broken tax system Noem and Rhoden brought us.”

    The operative word is “system”. The whole damn thing not just Ag. The whole damn thing. 43.5% of Americans pay no taxes at all. Income, property, school all of it.

  12. mike from iowa 2018-08-26 15:14

    Sorry OLdSoapweed, but you are wrong all over again. Here is what Master actually sayeth- Why our sixteen-year legislator gets so mad at me escapes me; as the conversation we had with voters after Al regained his composure demonstrated, his real anger should be with Kristi Noem and Larry Rhoden for saddling South Dakota farmers and ranchers with an unfair and “broken” tax system. Not a word about other taxes that even us poor, disabled and elderly pay, even though some of us do not pay income taxes.

    Note he mentions the two deplorables saddling farmers and ranchers with an unfair and “broken” tax system

    I don’t collect enough SS to owe any income taxes and I don’t get refunds from the government like many korporations that don’t pay income taxes.

  13. OldSarg 2018-08-26 16:01

    Doesn’t matter. America is still winning and we are winning because an outsider has taken the presidency.

    Walmart VP of Investor Relations Dan Binder: “Job growth is great. Wages are up. Credit is expanding … So the consumer is in great shape. In the surveys that we look at, they tell us that they are feeling good about their financial condition.”

    Home Depot CFO Carol B. Tomé: “As we look to the back half of the year, we continue to expect strong economic growth, with the backdrop of a healthy home improvement environment. Homeowners continue to enjoy home price appreciation, and rising wages and low unemployment have driven consumer confidence to record high levels.”

    Macy’s CEO Jeffrey Gennette: “Based on the first-half performance, our strong execution and the anticipation of continued healthy consumer spending, we’re raising both sales and earnings guidance for the year.”

    Lowe’s CFO Marshall A. Croom: “We expect to see solid sector growth driven by gains in employment which should boost disposable income and consumer spending.”

    Even the stupid are benefiting. . . yet still whining.

  14. mike from iowa 2018-08-26 16:22

    Gains for employees are more likely due to low unemployment numbers which force employers to pay more to get the workers they need.

    WalMart raised minimum wage at the same time they shuttered 63 Sam’s Clubs and canned 11K employees.

    You can bet OldSocratease’s last dollar that corporate share holders reaped the majority of corporate tax reductions.

    Speaking of whining, liar, how do you manage to be both stoopid and such a liar at the same time?

  15. Jake Kammerer 2018-08-26 16:32

    Old Sh– fer brains seems to relish the fact that the poorer spectrum pays the highest percent of income in taxes of all society of all taxpayers. This is another result of a broken tax system that the entrenched political party (GOP) loves and continues. Noem/Rhoden are GOP power-brokers and strong advocates of lopsided unfair tax systems. I’d be interested to know of the size of OS’s gov’t retirement checks.

  16. mike from iowa 2018-08-26 16:37

    There will be growth until Drumpf’s tantrums turn the economy sour. It is written in the cards. One can only hope drumpf does nothing to or about the economy to mess it up. Thanks Obama and Dems for pulling wingnut cojones out of the recession fire some more.

  17. mike from iowa 2018-08-26 16:39

    I think Old? just admitted Putin was potus.

  18. Porter Lansing 2018-08-26 17:15

    Manure Pile ‘O the Day ~ 43.5% of Americans pay no taxes at all. WRONG!! (Since OlSoviet has been schooled on this before, he’s no longer mistaken. He’s flat out a liar.)

  19. o 2018-08-26 17:18

    OldSarg: “43.5% of Americans pay no taxes at all.”

    I do not believe that is true. In fact it was Trump himself who when defending himself for not paying federal income taxes that he paid many other local/state/sales taxes. I think you might have jumped from a statistic on federal income tax to make the claim of “all taxes” here, OldSarg.

    “we are winning . . ” I guess that depends on who “we” are. Wealthy, white males are doing great. But then again, they always do find a way to come out on top – they don’t really need a President’s help to do that.

  20. mike from iowa 2018-08-26 17:19

    OldSlops got the percentage right, but they are the ones that pay no income taxes. They pay other taxes, though.

  21. Porter Lansing 2018-08-26 17:39

    43.5% of Americans owe NO federal income tax is on the other side of the truth from 43.5% of Americans pay no taxes at all. Does this young man (30’s in age – teens in maturity) think there are people reading this blog that believe him? There IS a blog in South Dakota with people that believe any lie you tell them, as long as they agree with it. I guess Young Man finds no enjoyment in lying to people that believe it.

  22. OldSarg 2018-08-26 18:07

    Try google. I am right. If you’re too stupid to figure out google click on this link: https://www.marketwatch.com/story/81-million-americans-wont-pay-any-federal-income-taxes-this-year-heres-why-2018-04-16 and there are thousands more like it.

    As for Trump: You can call him a liar, white trash, stupid, ignorant or any other nasty name you would like but Trump has never said even one lie that equals the lies of our past presidents who’s lies resulted in the deaths of thousands of Americans (Johnson), was an economic incompetent (Carter), raped women, sexually abused someone’s daughter (Clinton), destroyed the best medical care in the world and weaponized the government against the American people (Obama) and the greatest pice of crap that almost made it in her attempt to undermined a lawful election (Hillary).

  23. Porter Lansing 2018-08-26 18:23

    You said that 43.5% of Americans pay no taxes at all.

  24. Cory Allen Heidelberger Post author | 2018-08-26 18:26

    OldSarg, read my lips: Larry Rhoden and Kristi Noem sponsored the 2008 and 2009 legislation that created the productivity system of taxing agricultural land in South Dakota, a system that Al Novstrup yesterday said is broken.

  25. mike from iowa 2018-08-26 19:02

    Stoopid, lying, sore loser, Troll. That is more than the tri-fecta.

  26. o 2018-08-26 19:25

    What lies did Carter tell about the economy? Stormy Daniels (and the others Trump has been accused of abusing) isn’t someone’s daughter?

  27. Jake Kammerer 2018-08-26 19:31

    In my book your boy Trump abused his own daughter with his several comments re: her! Am I right?

  28. Porter Lansing 2018-08-26 21:36

    After 16 years in Pierre, maybe Sen. Novstrup has Peter Principled? If an employee of mine was presented with as serious a problem as unfair taxation of ag land and his/her answer was, “Yep, it’s broken.”, I’d think a couple things. I’d think this employee didn’t know what to do. I’d also think this employee doesn’t have the initiative or desire to figure out what to do.

  29. Heidi Marttila-Losure 2018-08-27 12:10

    I’ll add: “Highest and best use” for whom?

    For a farmer aiming to diversify his income sources who wants some pasture?
    For a farmer who is adding some less-profitable crops into the rotation to improve soil health?
    For surrounding landowners who have to deal with the effects of the farmer’s choices? (Tiling water off their own land onto a neighbor’s, for example, or dicamba drift.)
    For those downstream, like the city of Des Moines, that have to pay increased water treatment costs?

    To define “highest and best use” as “how to make the most money from this acre this year” is short-sighted and self-centered. We have got to start understanding the systems in which we live, and work to create policies that take those systems into account.

  30. Cory Allen Heidelberger Post author | 2018-08-27 12:39

    Some years, the highest and best use is to leave the land fallow and let it recharge, right?

  31. Francis Schaffer 2018-08-27 19:04

    I get frustrated every time the topic of ag land valuation rears it’s ugly head. I think of the instrument used to determine the parcel value – the NRCS soul survey. It was never intended to be used on a scale smaller than 1:20,000. Also no yield data was used to determine the productivity index, nor is there a plant by date for the farmer to achieve that productivity index. Also, this instrument was developed by the federal government and is free. I don’t know what else to say, yet it is wrong and in my mind illegal to use this tool for taxation purposes. What is my legal argument? The 8 year Olympic average. Maybe we should use that to collect other taxes too.

  32. Cory Allen Heidelberger Post author | 2018-08-28 07:04

    Francis, remind me: would you find a straight income tax fairer than the ag productivity model?

  33. Francis Schaffer 2018-08-31 22:43

    Cory
    I have no idea what would be a better property taxing system, yet the current one is too flawed to fix. I think an income tax should be implemented as an additional source of revenue, reduce property taxes and eliminate sales tax on food and clothes. I think income tax should only be permitted by counties and thus by extension to school districts, the state should not be allowed to use that pool of money after years of refusing to entertain it as a possibility.

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