Why Not Tax the Farmers?

The state of Kansas is in crisis. Income tax cuts passed in 2012 have failed to give the state's economy the "shot of adrenaline" that Governor Brownback promised. Now the state is facing a $648 million budget deficit for the upcoming fiscal year. The legislature has discussed several ways to make up the shortfall. The latest proposal to close the gap, by state senators Jeff Melcher (R-Leawood) and Les Donovan (R-Wichita), is to increase taxes on farmers.

Melcher's SB 178 would increase the tax appraised value of farm land. Donovan's SB 264 would eliminate farmers' exemption from state sales tax.

In an op-ed for the Hays Post, Rep. Don Hineman (R-Dighton) puts the ag land tax in context.

Back in the 1980s, the method of appraising agricultural land for property tax purposes was changed.  At that time ag land, like all other classes of property, was valued on its market value.  But inflationary pressures were making it difficult for farmers and ranchers to pay their property tax bill.  Ag land is the only class of property which never grows, and the old saying that “they aren’t making any more” is entirely accurate.

Melcher's bill, according to Hineman, "would increase valuations on dryland by an average of 408%, irrigated farmland by an average of 593% and grassland by an average of 672%."

Donovan's bill, by contrast, would target farmers upgrading their machinery. Such purchases are currently exempted from state sales tax due to the high cost of the equipment. Without the exemption, sales tax on a $250,000 tractor would be about $21,000.

Although there is never a good time for a drastic tax hike, this is a particularly bad time. The southwest part of the state suffered an extreme drought beginning in late 2010, a drought which spread until it covered the entire state in 2012. Even now, most of Kansas remains in dry or drought conditions. Drought reduces crop yields, which in turn reduces farm income. The double whammy of lower income and higher taxes would be devastating to many farmers.

It would also be devastating to many Kansas politicians. In the map below, red and yellow represent urban and suburban areas, and green represents rural areas. Legislators representing any of the green area will lose their jobs if they vote for this bill.

I don't know if Senators Melcher and Donovan have looked at a map recently, and I don't know if they understand how food gets to the grocery store. But I do know they're not taking the deficit seriously if they think taxing farmers is the answer.