I think it is fair to say that two issues dominated yesterday's Cracker Barrel in Aberdeen. More time was spent on SB 173 than any other issue. As usual, education came up, but this week it was standards and practices in education rather than funding. I will discuss education in a separate post.
Denise Ross has some background on SB 173 here. To give an idea of how important local legislators think SB 173 is, two of them spent their opening remarks on this bill. Al Novstrup indicated that this is essentially an income tax with no deductions for farmers. Paul Dennert apparently asked for and got extended time to discuss this issue at length in his opening remarks. The Aberdeen area legislators, four Democrats and two Republicans, seem united in the idea that this is a terrible piece of legislation.
The audience member who asked the question about the bill prefaced his remarks by admitting that property tax issues are often considered complex and boring, but that is it a pressing matter for the state. He is certainly right about complexity, so in that spirit I will try to reproduce what was often a technical discussion into something readable and understandable. The issue is how do you figure the value of agriculture land for the purpose of taxation. All seem to agree that the so-called "150 rule" is broken. The effect of this rule is that we use the sale of land to determine the taxable value of the land, but because sales of over 150% of assessed value aren't counted, in many counties there are no sales that count. I take this to mean that sales of over 150% of assessed value are the norm in agriculture. SB 173 tries to tax productivity of ag land rather than its assessed value or sale value.
But how do you measure productivity? Paul Dennert points out that in a county near the Black Hills (I think he said Fall River), there might be land close to the Hills worth $3000 an acre and land on the other side of the county worth $300 an acre but under SB 173 they could be taxed the same as their productivity is equal. Doesn't seem fair. Al Hoerth pointed out that the numbers that will be used to divine the "productive value" are largely fictitious. It is unlikely, he claimed, that we will get accurate numbers from farmers. That inaccurate number will then be manipulated by some factor number that is being created out of thin air. Hoerth, a realtor, likened it to a capitalization rate in real estate, but, he said, that number is created after taking all sorts of factors into account, not beforehand as in SB 173. So, as Hoerth puts it, SB 173 proposes to take one inaccurate number and divide it by a fictitious number and magically it will produce the "right" productivity value. Al Novstrup main argument was that this is essentially taxed a farmer's income without deductions, and that's unjust. He has proposed an alternative bill, HB 1308. Jim Hundstad took time argue that he had a solution in Constitutional Amendment D in the last election (you can find that proposal here in the 2006 Ballot Questions manual from the Secretary of State).
The discussion, as I say, was quite complex and technical and I hope I have given the spirit of it and reported accurately. The main point is that everyone who spoke on the matter was opposed to SB 173. Al Novstrup, though, said that leadership is on board with the bill and it is going to be tough to stop.
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