NCPA - National Center for Policy Analysis

Property Taxes for Agriculture: Use-Value Assessment and Urbanization Across the United States

August 28, 2015

Use-value assessment (UVA) programs have spread across the nation as the trend toward urbanization increases. While all 50 U.S. states have some form of a UVA program which taxes agriculture land on the basis of current use rather than full market value, in states where the average farm size increased, state legislatures were quick to adopt UVA programs. The tax benefit to agricultural land owners is significant especially for land near large urban areas.

  • Over 100 million acres of land in California are included in the state's UVA program.
  • In Ohio where more than 61 percent of all land is included in a UVA program, assessed land values are more than 80 percent below market values.

The early adoption of UVA program began with concern over the demise of the small family farm during a time when farm sizes were pressured to increase to respond to economic changes. Policy makers were also concerned that farmland was being forced to urbanize at a detrimental rate.

State and local governments are accepting large losses in tax revenue by continuing to allow UVA programs. Several states do not have clear definitions of "agricultural land" allowing land owners to receive reduced property taxes on fallow land, wetlands and forests. The loss of property tax revenue is felt directly by local government agencies, particularly public schools.

Local policy makers should reevaluate UVA programs to determine the financial burden imposed on local governments through the loss of property tax revenue. Although controlling for urbanization and rising land value originally, current UVA policies are an under-researched area dominated by special interest groups and could provide a helpful source of revenue to future generations.

Source:  John E. Anderson et al., "Property Taxes for Agriculture: Use-Value Assessment and Urbanization across the United States," Mercatus Center, August 24, 2015.

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