Nebraska ag producers pay nearly 50 percent more than the national average in property taxes
Nobody likes taxes, but Nebraska farmers and ranchers have even more to dislike than many others around the country.
According to a study by J. David Aiken, Nebraska agriculture property taxes are among the highest in the United States. Over the last three years, Nebraska farmers and ranchers have paid nearly 31 percent of their net farm income as property taxes (47 percent in 2017). Aiken, an Extension water and agricultural law specialist at the University of Nebraska-Lincoln, said that when state and federal taxes are factored in, this represents an effective tax rate of more than 50 percent (over 60 percent in 2017.) Nebraska property taxes on agricultural land as a percentage of net farm income are 146 percent of the United States average (1950-2017 data). The 20-year average is 150 percent, the 10-year average is 147 percent, the five-year average is 164 percent and the three-year average is 188 percent. Property taxes are the single largest tax paid in Nebraska, accounting for 38 percent of total state and local tax collections.
The study revealed that sales taxes make up 29 percent of total taxes, and income taxes are 26 percent. Sixty percent of property taxes go to K-12 education funding. All property taxes fund local government — cities, counties and local school districts. All income taxes and 84 percent of sales taxes are used to fund the state government. Currently with high ag land values across the state, 85 percent of state aid goes to non-agricultural areas and 15 percent is distributed across the board to all school districts. Two-thirds of Nebraska school districts (largely rural) receive little to no state aid.
In Nebraska in 2017, 42,502 farmers paid $686.5 million dollars in property taxes. On a per-farm basis, that breaks down to $16,151 each, second only to California with the average there being $17,229. The national average in 2017 was $4,902, according to data from the 2017 ag census collected by Chris Clayton, DTN ag policy editor.
John O’Dea lives near McCook, Neb., with his wife and sons. They are feeling the high tax rate, paying $9 a year per acre of grass. More of his tax dollars are given to support Mid-Plains Community College than he can afford to give his own son, who is putting himself through Fort Hays State University in Hays, Kan. This for him was a cheaper option than Southeast Community College in Nebraska.
“My sons were talking the other day and they agreed “The expense of being a Nebraskan is getting too high,” O’Dea said. “The state has turned into two liberal cities that expect the rest of the state to support them. Folks are having to work off the place to support the ranch. Who will feed and pay the taxes if they force everyone out. It is having a ripple effect on small towns and communities. Every ag producer that has to take a job in town is taking that job away from someone else. I’m 43 years old and I’m paying more for property taxes now than I did for rent when I started. Land in Nebraska is a liability.”
O’Dea feels that there will be some major changes made as producers attempt to refinance land and cattle in the next few years especially with land values going down. The O’Dea family is seriously considering moving their base of operation to a more ag friendly state in the near future.
“The death losses in Nebraska alone will more than offset what USDA estimated that the calf crop was set to increase in 2019. If calf and yearling prices are not considerably higher this fall, our supply and demand market is broken beyond repair. The cow calf expansion phase was at or near its peak, so these losses will pull us back into a shrinking phase in the cow calf sector,” O’Dea said.
Another Nebraska rancher, Karina Jones, said that on top of weather-related disasters, her state’s property taxes are overwhelming.
“Property taxes are like a second mortgage,” Jones said.
The Jones Ranch in Custer County, Nebraska, has been hit hard by nature and in a way they were kicked repeatedly while they were down.
“Our situation is unique. We endured the hailstorm in August of 2017, we had to wean calves immediately and start feeding cows on Aug. 13. We didn’t have a blade of grass left on this ranch,” she said. By early December of that year, they were running out of feed, and they were forced to send all of the mother cows to be fed by someone off the ranch. “We fed cows from Aug. 13, 2017, to June 1, 2018,” Jones said.
Jones thinks the state is taking advantage of ranchers like herself and her husband.
“You would think the government would value people like us. We have a particular skill set that can not be taught in a classroom. You cannot learn how to be a rancher from Google. It is generations of DNA intelligence. When they put us out of business, it is all lost. Society won’t be able to get that back. We have a particular skill set to feed the world and I can not think of a more noble profession than that,” Jones said. “It doesn’t matter if you own the ground or lease it. The cost of these high taxes is carried by the producer, the cow/calf man or the yearling guy. With the poor cattle markets the last few years we cannot support this tax burden. I do not know the last time I bought my girls a special sports drink at the supermarket line or convenience store. I cannot afford extras.”
The Jones are not a multi-generational operation. “We do not have the working capital of the generations before us to lean on. It all falls squarely on our shoulders, just like many other operators around us. It is a big load to carry,” Jones said.
The Jones’ had insurance on their home but hay loss from the hail storm was not covered because hail is a non-covered peril. The same with destroyed grass, trees lost, poor weaning weights on the calves that the cows had at side and poor performing calves that they had in utero. “We just want to raise cattle and kids. That’s all. We don’t want to take from anyone else. We want to give back and better our communities. We want to contribute fairly to our tax commitments. We want to feed our neighbors with a high quality product that we are proud to feed our own families.”
Jones would like to see some producer support meetings where others like her could share ideas. “We all need some good education and a place to be positive and focus on solutions. And yet we need a safe place to be heard. The bankers need us to stay in business,” said Leah Peterson of Custer County, Nebraska. “And none of us want easy; we just want a fair shot. Taxes take that away. As someone says, it’s like paying taxes on a 401K every year.”
Jim Scott, branch president of Bruning State Bank in Broken Bow, Neb., said, “High property taxes are definitely a major issue due to the current ag economy and high expenses. There has been a depreciation of land values in the last 12 months, due to more land being sold and less profitability, people are looking to reduce debt load.”
“We need to even the tax burden on all citizens, like with a sales tax increase; we are waiting on the legislature to help. Producers need to get involved and pay attention to how money is spent,” he said.