September 1, 2006
Set the record straight on ag exemption abuse...
By Billy Howe
State Legislative Director
"What are you guys going to do about the abuse of the ag exemption?" I would be living on a big house on a big ranch playing cowboy all day if I had a dollar for every time a legislator or lobbyist has asked me that question.
The frustrating thing is that the "abuse" of which they are speaking isn't an abuse at all. It is a misunderstanding of how land is valued for its agricultural use. However, it is a very dangerous myth that Texas Farm Bureau and other agricultural organizations cannot allow to continue.
The legislature adopted a good school finance plan this past spring that should certainly reduce the pressure on property taxes. The fact is, however, property tax remains a major funding source for public education. Eyes will remain fixed on what the tax assessors consider to be revenue lost to their schools and counties due to open-space valuation of agricultural land. In their mind, this revenue is lost because corporations, developers, and wealthy people are abusing the "ag exemption."
To our critics, the purpose of open-space valuation is to help the poor farmer or rancher stay in agriculture. When the law was first passed, this was true. You couldn't qualify for the special agriculture valuation unless a significant portion of the landowner's income came from agriculture. But this law was quickly changed because it didn't work.
Agriculture is too broad and diverse to use an "income test" to qualify for agricultural valuation. More and more land was leased for agriculture. The landowner wasn't actually practicing agriculture. And, farm families were relying on off-farm income to make ends meet. It became clear that the valuation had to be based upon the use of the land. The purpose of open-space valuation is to help make farming and ranching affordable, regardless of who owns the land.
Our organization must dispel the ag exemption abuse myth or agriculture producers, whether full- or part-time, will lose open-space valuation. As a result, they will lose ability to practice agriculture on their land.
We must explain how economies of scale, low commodity prices, and urbanization have changed agriculture. Due to these changes, those engaged in agriculture and those who own agricultural land don't fit the traditional farmer and rancher stereotype.
Agriculture is agriculture, regardless of who is practicing it. The costs of production are the same and the income from that production is the same for everyone. And don't forget the impact on all the tenant farmers and ranchers if we were to revert back to qualifying for the valuation based on the income of the landowner.
The bottom line: if land is legitimately being used for agriculture, then the "ag exemption" is not being abused. It is fulfilling its purpose to keep land in agricultural production. We need your help to set the record.