House legislation addresses ag loans, taxes on farm properties
With the first committee deadline a week away, bills are moving through the process. The House also passed its first bill of the session last Thursday, one that provides extended unemployment benefits to Iron Range workers, in addition to lowering the amount of money in the fund that provides those benefits. Businesses pay into the unemployment fund, and fewer claims up to this point had left the account more than adequately funded.
I’m carrying legislation dealing with a program called Farmer-Lender Mediation. Originally passed in 1986 during the ag crisis, the program has been extended 19 times since then. The loan threshold amount set 30 years ago was $5,000, meaning any loan over than amount was eligible for mediation. It is still at that same level today, even though inflation has increased most prices substantially since then. I was of the opinion the threshold could be increased, but others thought that with all the new farmers in some parts of the state who run smaller acreages, it should be left as-is. The new bill language extends the program for two more years, but also establishes a commission to examine the program and come back next year with recommendations to the Legislature for possible changes. Among the 12 members of the commission will be farmers and bankers, along with representation from University Extension, Farm Business Management, and the major farm organizations. From what I have learned, the program has never been changed since it was established, so this will be a good chance to study and possibly modify the program to align it more effectively with today’s world of agriculture.
In the first meeting of the session in the Property Tax Division, we heard three proposals pertaining to property taxes paid on farm land. Ever since land prices started “taking off” several years ago, the taxes on that land have also gone up dramatically. And now with commodity prices at levels that don’t allow farmers to make much of a profit this year, the amount of taxes paid on that land has become a major point of consternation.
Two of the bills dealt with credits and how they could lower the amount of taxes. The third calls for a study on how Minnesota assigns values to ag land. Most other states use a system that takes soil productivity and income potential into account when setting values on this land. I think most would agree that with our current system of using arm’s length transactions to arrive at that value, other factors often play a role in what agricultural land may sell for. Speculation that prices will keep going up, low interest rates that make land an attractive investment, and the obvious fact that they aren’t making any more land, can all increase what some may be willing to pay.
I would support taking another look at how we assess this property. However, that will not address the immediate situation we face today, which is rising tax bills and falling farm income with which to pay those bills. The state credit on school capital referendums, in my opinion, is the best short term solution to lowering those taxes. However, it’s not cheap. Cost estimates range upward to $50 million per year, with the number increasing by 3 to 4 percent each year thereafter. That provision is part of the House tax bill from last year, and it’s currently in conference committee with the Senate. With the state surplus being cut by 25 percent, the level of tax cuts we are able to pass this year may be affected.
Happy Easter to you and your family.