Every two years the Missouri State Tax Commission re-evaluates land production in the state and makes recommendations as to whether to raise, lower, or retain the current rates of assessment on our state’s agriculture land. Their proposal will go before the General Assembly when session begins in January, and lawmakers will then have sixty days to act upon the recommendation by rejecting it or by taking no action, thus allowing it to go into effect.
This process begins in the fall of the odd-numbered years with hearings before the state’s tax commission. At that time the commission presents their reasons for wanting to change assessment values on farmland.
In 2012, Missouri lawmakers blocked the tax commission’s proposal which sought to increase assessed valuation on the top four grades of farmland but lowering it for the next categories—5 through 7—and kept unchanged the last category, category 8. Property taxes paid on Missouri farmland are based on the land’s production rather than the land’s market value. Our state’s farmland has 8 grades, with 1 being the best (easily worked and with dependable crop yields) and 8 being the worst for agricultural productivity (rough, steep, sandy, rocky, and wet or swampy). Categories 1 thru 4 are basically farm and crop land while 5 thru 7 are usually hay, pasture, and cattle land.
Back in 2012 when corn, soybeans, and other commodities were at their highest market values, the tax commission wanted to increase the top four categories of farmland. This was rejected at that time by lawmakers. Then in 2014, their recommendation was to increase productive land assessment values by 5%. Lawmakers that year did not challenge the tax commission’s proposal; consequently, the deadline passed and the increase took effect for the 2015-2016 tax year. This year the tax commission is considering an increase as high as 20% to 24% on land that is grade 5, land primarily used for limited cultivation but more suited for livestock and hay. The focus is mainly on grade 5 land this year because of the recent high cattle prices. However, predictions are that these prices will soon be heading downward, as the commodity grain prices have already done. Following the hearings this past week, the commission will make and present their final recommendations by the time session begins in January. Testifying against any new taxes at the meeting on December 3 were the following major agriculture organizations: Missouri Farm Bureau, Missouri Corn Association, Missouri Soybean Association, Missouri Cattlemen Association, Missouri Pork Association, Missouri Dairy Association, as well as several farming and ranching individuals.
Assessments on farmland are particularly important since agriculture has historically been a vital component of Missouri’s economy. In many of our state’s communities, agriculture is the main industry that provides a tax basis for both local and state government. Oftentimes in the tax commission’s proposals, numerous factors are not taken into consideration, such as unpredictable weather conditions and the fluctuations in market prices, as well as the ever-increasing and mind boggling costs of production. Many times the commission does not take into account that farmland produces a large tax base for Missouri and also provides affordable food for our state and beyond. In comparison to other states, we rank 14th in total value of agricultural products sold in the nation and 15th in farm exports. Missouri farmland accounts for 66% of the state’s land usage. This makes agriculture the largest industry in our state and exorbitant tax increases could greatly hinder Missouri’s economic growth.
Over the last several years rural Missouri lawmakers have introduced legislation to address this taxation issue with a measured approach that is less aggressive than some of the proposals now being put forth by the tax commission. Today’s farming is facing an uncertain future. Falling commodity prices, lower net farm income due to weather (both drought as well as flooding), and increasing costs of complying with environmental rules and regulations could spell big problems for agriculture. Staggering equipment and production costs, while trying to be competitive on the international market, strikes another blow.
Even though Missouri farmers are tough and optimistic, based on the aforementioned uncertainties and challenges, most in the agricultural community believe it would be wise to leave tax values at the current level and not seek any increases at this time.
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