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A New Tax Formula That Could Benefit Ohio Farmers Could Hurt Its Schools

Ron Grayson Burns

Ohio farmers have been pushing lawmakers to change the formula that determines how much in taxes they pay on their land. But the change could hurt another industry. h

Ron Grayson Burns looks over his vast wheat field in Union County.

“This field here this is just under 10 acres in this section. So it goes all the way back to the tree line that’s behind the grain bin."

Burns says farming requires making important business decisions every day.

Ron Grayson Burns' farm in Union County.

“If you buy something now is that going to be good for the short term or (makie) something more of a long-term investment," Burns says.

He points to his tractor and planter sitting on the gravel lot that leads up to the barn. The equipment is bigger than what Burns needs for the land he’s currently farming, but he hopes to expand his business.

“I hope to get at least eight years out of those so those are things that I can work in now. But I want my operation to grow so having a larger planter instead of that 6-0 I know that it’ll fit my operation for the next five or six years," Burns says.

'You still want to have a quality product, you still want to be good stewards of the land. ... But then where do you have to cut?'

But Burns and farmers all around Ohio are facing a dilemma. Valuations on farmlands are increasing, which means they’re seeing their property taxes skyrocket by as much as 300 percent.

As Burns puts it, the hike in taxes puts a lot of stress on the already challenging balance of running a farm.

“That’s when you go back to that pen and paper, and you start looking to see what you need to do," Burns says. "Do you cut some cost-of-living for that time?

"You still want to have a quality product, you still want to be good stewards of the land so you still want to maintain those aspects of your farm. But then where do you have to cut?'

Figuring out the formula
This all goes back to what’s known as the Current Ag Use Valuation, or CAUV. This formula calculates the tax value of farmland.

It's complicated.

But agriculture advocates believe the cause of the jump is tied to what’s known as the Equity Capitalization Rate, which is based on the federal interest rate. Since the federal interest rate has been held low, the valuation has gone up.

Leah Curtis with the Ohio Farm Bureau Federation says there are proposed changes in the state House and Senate which would take that factor out of the equation.

“The solution is to correct those assumptions in the calculation and make sure they are more closely tied to the farm economy. That’s things like making sure that equity rate is tied to actual farm equity rather than just the national interest rate," Curtis says.

The cost to schools
This is a fight that’s been brewing for a while at the Statehouse. That’s because, while the proposed change might bring down farmers’ taxes, it could also result in a big funding cut for schools.

'The way the Ohio tax structure is assigned, when one taxpayer pays less, others will pay more.'

Damon Asbury is with the Ohio School Boards Association. He says the proposals in the House and Senate could cut funds by as much as $20 million a year collectively from school districts around the state.

Asbury understands the adversity farmers face with the higher taxes, but he believes lawmakers are rushing without thinking it through.

“What we do have  concerns about is: what would appear to be a relatively rapid change without understanding the implication for both schools and local government and other taxpayers. The way the Ohio tax structure is assigned, when one taxpayer pays less, others will pay more," Asbury says.

According to Asbury, that jump in rates already seems to be leveling out on its own, and rates might not be too high in the next valuation. However, his group does believe an independent panel should look into a solution.

“It may very well be that some are antiquated like the capitalization rates. But on the other hand we’re not believing that the industry itself should be recommending the solution because it affects everyone, taxpayers, local government," Asbury says.

"We think that an independent commission that looks at the factors and comes up with a fair recommendation that would treat all fairly would be the right step."

Back in Union County, Burns’ farm is just 5 miles away from where he graduated from Fairbanks High School. He says he understands the importance of investing in education and community. Burns adds that changing the CAUV formula is a balancing act, just like running a farm, to make sure everyone’s paying their fair share.

“We don’t want it for a selfish reason and we don’t want it cheaper. We want it to be accurate and that’s what the goal is," Burns says.

The CAUV change is part of the House version of the budget, which is now in the Senate. And the Senate passed a stand-alone bill to make that change; it’s now in the House. Either way, lawmakers could approve a change as early as this month.

The largest group of farmers is preparing to be evaluated again for new tax rates by the end of this year.