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Ag Productivity Tax Ignores Wind Energy

Speaking of how we tax agricultural land, Rapid City attorney and columnist David Ganje notes that the productivity formula used to calculate the maximum potential income that serves as the basis for farms’ and ranches’ property tax ignores the impact, positive and negative, of wind turbines on ag income:

…But the practice and policy of the state is not to consider wind turbines and wind farm infrastructure as a taxable asset. The presence of turbines and infrastructure does not change the taxable value of the land on which the infrastructure sits. This principle is rather unique in the tax world.

For tax purposes the state tax code ignores the windmills sitting on the land.

OK. No tax consequences, but what about the projects actual effect on the land? Ag land under the law of equalization is taxed on a complicated formula based on the agricultural production of the land. Does the state tax system consider the effects of production where project infrastructure dots the land in question? No, turbines and turbine foundations, concrete pads, footings, towers, guy wires, support fixtures, anchors, fences, all overhead and underground electrical cables, and all overhead and underground telecommunications cables necessary are not considered for real estate tax purposes [David Ganje, “Wind Turbines and the Pocketbook,” Rapid City Journal, 2021.10.23].

South Dakota’s property tax system does not reclassify the few acres that wind turbines on farmland may take out of production. That’s akin to charging ranchers taxes based on what they could make planting corn on a certain plot when they’ve grown nothing but grass there for 30 years. But the tax system doesn’t contemplate wind energy as a cash crop contributing to the value of agricultural land, either. If the lease payments a farmer gets for hosting a few wind turbines exceed the value of the few hundred bushels of corn or beans or the handful of extra cows that could have been raised where those turbines stand, South Dakota’s ag productivity tax doesn’t touch that higher productivity. If a string of farms lie on a particularly windy ridge that has wind energy developers bidding up the value of the land, the ag productivity formula does not notice.

We could reform the ag productivity formula to include wind energy potential, although such an inclusion could lead us to wonder why we don’t include other potential commercial uses—hunting lodges, eco-tourism AirBNBs—that can produce more wealth without shutting down farming or ranching and triggering a reclassification of the land from agricultural to commercial. We could revert to assessing farm land on its market value, which would reflect how much value buyers see in farm land that hosts or could host wind turbines.

Or we could just tax income, on corn, cows, and kilowatts alike. If wind turbine leases boost farmers’ revenue, counties could fairly tax that currently untapped wealth. If wind turbines are a net loss for farmers, their taxes would go down proportionally.

11 Comments

  1. larry kurtz 2021-10-25

    Weeds, erosion, sight pollution: utilities are not your friends.

    No corporate taxes, a compliant regulator, a dearth of environmental protection and cheap labor make South Dakota the perfect dumping ground for earth killers like coal and eyesores like wind farms. In 2017 a Montana Fish, Wildlife and Parks study determined a single wind farm kills between 120 to 397 bats annually or about nine bats per turbine. Today, public lands are at risk to wind farm developers.

    Avangrid, Inc., a US-based subsidiary of Spanish energy firm Iberdrola with a base in my home town of Elkton, South Dakota has spent at least $216 million on a wind farm. That amount of cash would take nearly 17,000 electric subscribers completely off the grid. Pending approvals Iberdrola and Avangrid will acquire Public Service of New Mexico (PNM) for about $4.3 billion. The move came just before voters changed the state’s regulatory body to an elected five-member board to a three person governor-appointed commission.

    The average cost of a household photovoltaic system has dropped below $3/watt or less than $12,810 before tax credits are factored in and leaving the grid has never been easier so anyone who can afford to it should do it now. Don’t tie your system to the grid but if you use it as a backup keep your electricity completely invisible to the utility that reads your meter. Microgrid technologies are destined to encourage self-reliance, enhance tribal sovereignty, free communities from electric monopolies and net-metering only gives control back to utilities enabled by moral hazard.

  2. Richard Schriever 2021-10-25

    This reminds of my suggestion to the Lincoln County Commissioners, when they were revising the county’s zoning ordinances a few years ago, that they create a new zone for “Specialty Agriculture”, that could allow smaller specialty farms, like vineyards, or alpaca farms, or free-range chicken farming, or organic vegetable gardening combined with an on-site retail stores or bnb’s. I felt it would be especially useful considering the number of acreages being platted out in the country around SF – some of which were being used in exactly that way. It would also be useful in addressing the concerns of “country living” hobby farmers being surrounded by large scale industrial farming and it’s odors and chemicals. It would function as a a sort of transition or buffer zone. They didn’t do it – of course. It was “something new and different” – didn’t fit their habitual frame of reference.

  3. Jake 2021-10-25

    I can’t fathom why any state, including South Dakota, would consider anything but a basic income tax on corprations AND individuals when both’s motives and reason for BEING are to make $$$.
    Not basing the needs of society’s costs on anything BUT the standard of exchange ($$$) give special interests all sort of room to finagle reasons NOT to pay their share of society’s costs.
    Were millionaires/billionaires made to pay as much % of their $$$ (in their names) as the lower and middle class do, everyone would pay LESS in tax. Now, wouldn’t that be nice?
    In South Dakota a tax of 4 1/2 to 6 1/2 cents on every dollar spent on food or (almost anythingsticks it to lower income’s tax burden big-time.

  4. Jake 2021-10-25

    Larry K-how would you propose keeping a “backup” away from the sight of your grid’s owner? And why would you advocate NOT tying it to the grid?!

  5. larry kurtz 2021-10-25

    Hey Jake, keeping a PV or hybrid electric generation system as a primary and having the grid as a backup is simple. Paying a minimum grid hookup tie is the problem. Utilities won’t pay retail for home generation so why bother legislating net metering?

    We run two houses with our 4000 watt PV system and have a 5550 watt gas generator for those rare days here where it’s cloudy for two days in a row.

  6. Porter Lansing 2021-10-25

    Heard on CON-serve-ative, talk radio …

    “The top 2% of tax payers pay 30% of all tax money collected.
    The top 10% of tax payers pay 70 % of all tax money collected.
    Any person or group that says the rich don’t pay their fair share is lying and trying to deceive you.”

    *The super rich pay a smaller percentage than even the lowest tax payer, thus the rich aren’t paying their fair share, no matter what their tax total is.

  7. Mark Anderson 2021-10-25

    The more complex the tax system, the easier it is to cheat, trump 101.

  8. O 2021-10-25

    Porter, the top 1% own 32.1% of the nation’s wealth; the top 10% own 69.8% of the nation’s wealth. Even by those metrics, the top 2% are not even close to paying their fair share.

    IRS investigations people who claim the earned income tax credit — so people who make $20,000 are most investigated. According to the treasury report, the wealthiest 1% of US taxpayers are responsible for an estimated $163 billion in unpaid tax each year, amounting to 28% of the “tax gap”. Unpaid taxes are just that — unpaid — not loopholes or accounting avoidance schemes.

  9. Jake 2021-10-25

    O- and that 163 billion either is borrowed from the Chinese banker or taken out of the nearly empty wallets of the bottom 50% of taxpayers. Usually, with the heavy hand of the GOP when in power-giving tax cuts to the rich (hidden or sold to voters as tax cuts for all”!)

  10. Edwin Arndt 2021-10-25

    How is fair share determined? Just askin’. And who determines how much fair share is?

  11. Jake 2021-10-26

    Good question, Edwin. Notice the ‘crickett’ noise from any and all of the grudz’, or Johnny Dale’s that frequent this blog.
    A quick answer, when I pay in hundreds of $$$, and Bezos and trump pay zero-duh-something is out of whack…..

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