Nebraska and Neighboring States’ Ag Property Taxes as a Percentage of State Net Farm Income Compared to US Average, 1950-2017

Nebraska and Neighboring States’ Ag Property Taxes as a Percentage of State Net Farm Income Compared to US Average, 1950-2017 January 31, 2019

Nebraska relies on property taxes as a source of public revenue to a greater extent than most other states. In its 2019 State Business Tax Climate Index, the Tax Foundation ranked Nebraska’s property tax as 40th, or tenth from the bottom (i.e., the tenth highest property tax in the US). US Census data show that Nebraska ranks near the top (second out of 50) in terms of the proportion of public education cost borne by local taxes (i.e., property taxes) and in the bottom quarter (38th out of 50) regarding state aid to schools.

In Nebraska, agland property taxes have risen to historic levels in recent years as state net farm income has declined, leading to an agland property tax crunch for farm and ranch landowners. This tax crunch led to a proposed initiative petition for the November 2018 ballot that―if adopted―would have given farmers, ranchers, and homeowners a refundable state income tax credit for roughly 30% of the property taxes they’d paid. While this petition drive was discontinued in April 2018, the underlying issues giving rise to the petition drive remained in place.

In summer and fall 2018 I undertook a study of Nebraska’s agland property taxes as a percentage of state net farm income and how this compared with the same ratio for the US as a whole.

To explore this, I obtained annual USDA Economic Research Service (ERS) data for net farm income by state and for the US as a whole, and annual ERS data for property taxes paid on agricultural land by state and for the US as a whole. This allowed me to calculate the percentage of net farm income that went to pay agland property taxes each year from 1950 to 2017 for Nebraska and for the US as a whole. By comparing those numbers I determined that the percentage of net farm income that Nebraska farmers and ranchers paid for property taxes over this period was 146% of the comparable figures for US farmers and ranchers, or 46% higher, confirming my original hypothesis.

For 2016 and 2017, agland property taxes were 28% and 47% respectively of Nebraska farmers and ranchers’ net farm income. Not only is Nebraska a relatively high property tax state in general, but agricultural producers carry a disproportionately high share of that property tax burden, compared to farmers and ranchers in other states.

The 146% figure is for the period 1950-2017 or 67 years. I have also calculated how Nebraska ag property taxes as a percent of net farm income compared to the US as a whole for more recent periods. The results show an increase in Nebraska property taxes paid as a percent of net farm income compared to the US as a whole. The 20-year average is 50% higher for Nebraska ag producers compared to their US counterparts, the 10-year average is 47% higher, the five-year average is 64% higher, and the three-year average is 88% higher. The last two figures reflect declining Nebraska net farm income and fairly level ag property tax payments.

Nebraska agricultural interests expressed an interest in having this analysis extended to the states bordering Nebraska. Cicely Batie, a graduate student in the UNL Department of Agricultural Economics (Brad Lubben advisor) performed the calculations for Colorado, Iowa, Kansas, Missouri, South Dakota, and Wyoming.

Results

Agricultural property taxes paid as a percent of state net farm income for Nebraska and surrounding states 1950-2017 are summarized below:

Table 1. Agricultural property taxes paid as a share of net farm income for Nebraska and surrounding states, 1950-2017.
StateAgland property taxes
as a percent of net farm income
State agland property taxes
as a percent of net farm income
as compared to Nebraska
Nebraska 18.02% 100%
Iowa 15.97% 89% (Nebraska’s are 11% higher)
Missouri 14.67% 81% (Nebraska’s are 19% higher)
Kansas 18.67% 104% (Kansas’s are 4% higher)
Colorado 12.53% 70% (Nebraska’s are 30% higher)
Wyoming 22.65% 126% (Wyoming’s are 26% higher)
South Dakota 15.68% 87% (Nebraska’s are 13% higher)

Readers should note that Wyoming does not have a state income tax, and that Wyoming property taxes pay for some government programs that income taxes help pay for in Nebraska.

In summary, Nebraska’s agland property taxes as a share of state net farm income are 46% higher than for the US as a whole. Nebraska relies on property taxes to fund K-12 education more heavily than any other state except one. Nebraska farmers and ranchers carry a property tax load almost one and a half times as great as US farmers and ranchers in general.

References

Nebraska aned Surrounding States' Agricultural Property Taxes as a Percentage of State Net Farm Income Compared to the US Average, UNL Digital Commons, J. David Aiken, 2019. Includes tables of data for US, Nebraska, and neighboring states.

US Census Bureau. Annual Survey of School System Finances.

Economic Research Service, US Department of Agriculture. U.S. and State Farm Income and Wealth Statistics (“Farm sector financial indicators, State rankings” for net farm income and “Production expenses” for property tax payments).

Tax Foundation.  2019 State Business Tax Climate Index.