property tax revolt voters personal property tax north dakota

Could a new kind of tenure create security?
farmland tenure

Tax Revolt in North Dakota, Minnesota, Michigan

Some owners feel used, cheated, and disrespected, never mind unable to keep as much profit from land as they'd like. Everyone should profit from land -- but equally, not competitively. We trim, blend, and append three 2012 articles from: (1) Finance Town Hall, Mar 26, on tax revolts by M. Shedlock; (2) Cattle News, Mar 30, on cropland by NDSUniversity Extension; and (3) Quincy Farm, on access by L. Deikis and C. Fraver.

by Mike "Mish" Shedlock, by North Dakota State University Extension, and by Luke Deikis & Cara Fraver

The North Dakota group, Empower the Taxpayer writes in two months, “the voters of North Dakota will have the opportunity to pass a state constitutional amendment that will abolish the property tax, prioritize spending by the legislature, and give local governments control over spending."

North Dakota counties get about 60 percent of their revenue from property tax.

If the amendment passes, school districts will have to get funding from another source, or cut budgets.

Minnesota Public Radio discussed the setup in North Dakota: “North Dakota residents are considering a proposal to make the state the first in the nation to abolish property taxes. Supporters gathered more than 28,000 signatures to put that question on the ballot next June.”

In the same vein, the Minnesota House of Representatives approved an act to freeze the statewide tax on business property for one year and phase out the statewide tax on business property over 12 years beginning in 2014. It also excludes 70 percent of the first $150,000 of value for all business property in 2013, benefiting small businesses throughout the state.

Elsewhere, Michigan Gov. Rick Snyder’s (R) tax reform plan calls for eliminating personal property taxes. Personal property tax in Michigan is paid by businesses on property not permanently affixed to land, such as furniture, tools, and computers. Michigan counties’ reliance on personal property tax has increased in recent years as revenue from other sources has plummeted. The state is one of 43 that implement some form of a personal property tax.

Court costs represent one of the largest expenditures for counties in Michigan. [“Court costs”, of course, means government largesse for lawyers.]

Illinois and Missouri are also looking into repealing their personal property taxes, but no legislation has been put forward.

Property taxes mean you never really own your home. Taxes go up at the whim of school boards and teachers unions who perpetually want more money.

Property taxes can be particularly hard on senior citizens who can literally be taxed out of their own homes. [This is often a red herring since most states defer this tax for the elderly.]

To read more .

JJS: Given the power of the state and the powerless of the individual, it is easy to see how the property tax makes one feel insecure. Yet many, many more people lose their home to mortgage foreclosure than to tax delinquency. The difference is, the mortgage is usually 30 years but the property tax is forever.

Another problem is the lack of quid pro quo. Whatever the property owner gets back for the tax payment may not be anything that the payer wanted or of any value to anyone at all. So having to pay makes the owner feel like a victim or a sucker.

What’s ironic, however, is that, as the tax on land goes down, the price for land goes up. When land gets too pricey, then the average Joe or Jane can not afford it, only the rich can. So owner occupancy goes down and absentee ownership goes up -- and the whole point of repealing the property tax gets defeated.

North Dakota farmland values were up about 18 percent statewide.

Since 2003, cropland values have increased at an average annual rate of about 13 percent, with the sharpest increases occurring since 2007. This surpasses an eight-year period of strong growth in the 1940s.

The strongest run up in cropland values during the past 100 years was a nine-year period (1973 through 1981), which averaged 18 percent annually. However, land values then dropped 40 percent from 1981 through 1988. It was 24 years (2005) before values again reached those that were achieved in 1981.

The factor raising land values since 2007 has been profitable crop production and low interest rates. Strong crop prices and generally strong yields have more than offset spiraling production costs. Another factor is the downside risk to producers, which has been mitigated by the strong prices at which they can insure the crop.

A major concern is the necessity of continued high crop prices. There are the risks of higher interest rates and a reduction in government subsidies.

To read more .

JJS: While the university researchers might be under too much pressure to mention the impact of prices on ownership, some real farmers can speak up when the emperor wears no clothes.

It's our opinion -- and our experience -- that the primary hurdle facing new farmers is secure, long-term access to good farmland. Access to capital and training are obstacles that all entrepreneurs face, but the competition for land that faces a farm start-up is a unique hurdle. A grower can develop the experience, finances, and plan to succeed, but it's reckless to gamble that success on unreliable or short-term tenure.

Historically, land tenure in the US has meant that a farmer owned his land, having inherited it or purchased it on the open market as a regular homeowner might. Given the skyrocketing prices of real estate surrounding metropolitan areas -- driven by development pressure as well as the market for "rural estates" and second homes -- this is simply impossible for today's new farmer. It's not just an inability to produce such a large down-payment: It's that even a well-run operation with established markets would be unable to service the mortgage on a market-rate purchase price. For a start-up, it would be ludicrous to take on such a burden. As the prices rise and the remaining farmland dwindles -- at a rate of 2 acres PER MINUTE according to American Farmland Trust -- this situation only gets worse and worse.

Quality farmland is a resource that we as a community -- in every sense of the word, from families to towns to states to the world -- need to protect. We all need to eat... and there's something to be said for preserving a diverse and healthy environment, too. Mark Twain famously said, "Buy land, it's the only thing they're not making any more of!" We need to "own" the farmland as a community and stop treating it as an individual asset or we're going to have one heck of a problem.

To read more .

JJS: Actually, I think it may have been another famous rural American humorist who said that -- Will Rogers. The authorship aside, the point is well taken -- and expanded upon. It’s not just farmland that we should think of as our commons but all land, and further, all land value -- all the money we spend on the nature we use -- should become our common wealth.

Owners should be able to profit from land. They should be able to keep all the profit from their improvement, untaxed, but they should share the value of their location with their neighbors, as their neighbors would share the value of their sites with them. That is, each would pay land dues in to the public treasury and get “rent” dividends back -- the geonomic formula for public revenue policy.

Once we do share the worth of Mother Earth, then we can watch as taxes and subsidies wither away, only dimly remembered as relics from the days of class, inequality, and statist oppression. Future humans will wonder how we of today could ever have put up with such injustice and inefficiency, as they enjoy the good life in geotopia.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Amazon Prevails in South Carolina as the US …

When the value of good land rises …

If the state won’t collect the commonwealth …

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