Private lands are vital cornerstones in the Intermountain West. Occupying the most agriculturally productive and biologically diverse portions of the landscape, these lands support local economies, produce food and fiber to meet human needs, provide critical habitat for the majority of wildlife species, source and purify drinking water, and provide recreational opportunities and scenic values that support eco-tourism and enhance quality of life for residents. Keeping these lands intact and healthy is essential to meeting current and future food, water and natural resource demands.
Recognizing this, some states have modernized property tax systems to enable farmers and ranchers to increase income opportunities, restore land health, maintain open space, provide for wildlife habitat and keep ranches and farms intact. Western ranches today, for example, increasingly depend on income from hunting, fishing and ecosystem services markets to stay in business.
In some states however, property tax regulations still limit these options. Ranchers who exclude livestock from riparian areas or critical wildlife habitat can be assessed at significantly higher tax rates. Landowners who manage for forest health rather than commercial timber production and farmers who set aside portions of agricultural land for wetlands, wildlife and non-commercial pollinator crops face similar risks. At least one state disqualifies landowners who earn more income from non-agricultural sources than from agricultural operations. This limits income opportunities for landowners as well as economic and tax revenue potential for the state and local communities.
In addition, there are a number of circumstances in which it is not feasible for a parcel of land to be managed in part or whole for traditional agricultural production. These circumstances can include personal situations like age, physical health or family matters. They can include locations in which traditional agriculture is either no longer compatible with surrounding land use, isn’t well suited to soil, water or topographical features, is in conflict with imperiled wildlife needs, or can’t be sustained under current climate conditions. In many cases, the circumstances are economic. It is increasingly challenging for smaller operations to make a profit on traditional agricultural production.
Parcels of land that are unable to support agriculture at the present time nevertheless can provide other important values by remaining intact, such as open space and wildlife habitat. They also remain available to meet future agricultural and natural resource needs. However, when these parcels no longer qualify for agricultural property tax assessments and taxes are significantly increased, many landowners are forced to sell that land for development. The resulting rural sprawl runs counter to the growth management plans and economic interests of most Western communities.
The greatest threat to agriculture today is the loss of prime land to development. The greatest threat to wildlife is the loss of habitat. Among the greatest threats to Western communities are depletions of natural resources like water and the economic impacts of rural sprawl. More than ever, the West needs public policies that help keep land intact and healthy for the sake of agriculture, wildlife and natural resources. Property tax systems can provide an important incentive to sustain these vital lands and natural resource values. However, in some states, modifications to current policies are needed.
Economic Benefits of Diversified Management
A recent study (executive summary here) conducted by Colorado State University in collaboration with Western Landowners Alliance determined that property tax incentives for diversified management have the potential to provide significant economic and environmental benefits to states and local communities.
Greater Equity Among Taxpayers
One of the greatest concerns about current agricultural property tax assessment policies is that landowners who are not legitimate ranchers or farmers can take advantage agricultural incentives, thereby shifting property tax burdens onto other taxpayers. For this reason, some states and local governments have encouraged a more stringent approach to agricultural assessment. However, studies demonstrate that stringent enforcement of traditional agricultural qualification requirements can result in the conversion of agricultural land to development, rural sprawl and, in some cases, agricultural activity that exceeds the natural capacity of the land. Both rural sprawl and degraded lands increase tax burdens on the public—the opposite effect of what was intended.
At the same time, studies also consistently demonstrate that open lands contribute more in tax value than they receive in services. Ideally, property tax policies should motivate landowners to keep agriculturally and biologically productive lands intact and healthy.