Agricultural tax breaks

There’s been a fair amount of talk this session about examining different types of tax exemptions, all of which combine to cost Texas billions in revenue, but there’s one type of exemption for which I have not seen any discussion: Tax breaks for agriculture. There’s an awful lot of property in Texas that get large reductions in the appraised value because they fall under an exception originally intended for farmland. The Nation explains how it works.

Take Michael Dell, founder of Dell Computers and the second-richest Texan, who qualified for an agricultural property tax break on his sprawling 1,757-acre residential ranch in suburban Austin and saved over $1 million simply because his family and friends sometimes use the land as a private hunting preserve to shoot deer. Or take billionaire publisher Steve Forbes, who got more than a 90 percent property tax reduction on hundreds of acres of his multimillion-dollar estate in upscale Bedminister, New Jersey, just by putting a couple of cows out to pasture. They are not alone. All across the country, a huge number of America’s wealthiest are tapping into agricultural tax breaks—and none of them have to do any real farming to qualify.

Not only are agricultural tax breaks allowing wealthy landowners to shift their tax burden onto other less-affluent taxpayers but they are also helping bankrupt public schools, which derive the bulk of their funding from local property taxes.

Agricultural tax breaks got their start in the ’50s and ’60s, as a response to the explosive growth of suburban development, which was encroaching on farmland and raising agricultural property values to the point where farmers were having paying their tax bills. Fearing that this would pressure farmers into selling out to developers, states began granting exemptions that allowed agricultural land to be assessed at rates well below market value. The practice, called use-value assessment, is today used by all but one of the fifty states to artificially deflate the value of farmland, frequently by 90 percent or more.

The plan looked good on paper, but in the real world it was quickly manipulated to steer money to the rich.

Many states expanded the definition of “agricultural land” beyond land that was farmed to land that simply had not yet been developed. In South Carolina, all it takes is five acres of trees to qualify for a tax exemption. New Jersey requires that a landowner have five acres, but also sell $500 of agricultural goods a year from their farm. Publishing magnate Steve Forbes and his wife, Sabrina, qualify for their exemption by breeding show cows on their 450-acre Bedminster estate. “You don’t make money selling hamburger meat. You make money breeding show cows; that’s the name of the game,” Forbes told Fortune magazine in 1996. Florida requires a couple of cows or a herd of goats, which don’t have to be on the property all the time. Texan law is so broadly defined that the PGA Tour golf resort in San Antonio has been trying to get recognized as a “nature preserve” to get a farm tax break.

“You can go out and cut some brush, put out some feed and count the deer once a year and qualify,” a tax appraiser from Travis County in Texas told the Austin American-Statesman.

That’s exactly what Michael Dell did with the suburban Austin ranch he uses as a second home. Periodically hunting and maintaining a “well-managed deer herd” reduced the property’s 2005 market value from $71.4 million to an agricultural value of $290,000, which saves him—and costs Texas—$1.2 million a year.

The story references this 2005 Chron article, which notes that “Across the state, $91 billion in property value is taken off the tax rolls. The loss in revenue to school districts tops $1.5 billion.” One presumes both figures are higher than that now. At the time that Chron story was published, before the 2006 property tax reduction, there was a little bit of talk about revisiting this exemption to make it more reflective of reality. That’s the last I’ve heard of any such effort. It won’t happen this session, of course, but when a saner Lege gets sworn in, it ought to be on the to do list.

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6 Responses to Agricultural tax breaks

  1. Ross says:

    Do you want to do away with the ag exemption all together, or just make it harder to qualify? I know people who own ranches primarily for deer hunting, but they run reasonably large numbers of cows on them to help pay for maintenance and upkeep.

    Keep in mind that eliminating the ag exemption would likely result in lower tax rates for most rural counties, rather than a huge increase in total revenue. HISD wouldn’t benefit much, nor would Dallas ISD, and other districts with relatively small amounts of ag land.

  2. texaschick says:

    We are farmers and ranchers for real and if you took away our legitimate ag exemption, we could not afford to pay the property taxes. I think the ag exemption should be harder to qualify for. Hint: actually have a farm and ranch operation. We run cattle, sheep and goats and sew oats or wheat for grazing and harvesting/bailing.

    Another hint: we are not wealthy.

  3. Jess Taylor says:

    You point out how unfair the property tax laws can be. It is actually much worse than this. The whole system is one big corrupt mess. Some people are getting breaks and some are getting gouged. None of it makes any sense. The property tax system is a dinosaur and should be made extinct. It costs hundreds of millions of dollars to implement – the Department of Revenue won’t provide a figure but it is well over $200 million. They can’t guarantee any semblance of fairness. Time to get rid of it altogether. Some states have actually made progress on this. Go to and get informed.

  4. Tiffany Tyler says:

    This kind of story always makes my blood boil. The big guys get their ag exemptions on what is clearly residential property (albeit very large lots with resident wildlife), and small urban farmers in Montgomery and Fort Bend counties are regularly denied ag exemptions on land they are clearly FARMING for a LIVING, selling their crops to restaurants and Co-ops and farmer’s markets.

    The exemptions are denied because the counties in question use the “highest use” argument, stating basically that because everyone around them is residential, their property should be, too. So they get taxed at residential rates on land that they are actually using for farming.

    The system is clearly broken, and the vested/ wealthy interests are not interested in fairness or any meaningful definition of agricultural use.

  5. texaschick says:

    Texas voters approved wildlife exemptions.

    Wildlife Tax Exemption

  6. Fireaunt says:

    There are plenty of bonifide Ag Use exemptions that are maintained by hard working Mom & Pop cow calf operations, farms, etc. These are the people who are feeding our Country and they deserve this tax break as long as they are taking something (cattle, hay, goats, sheep, fruit, nuts, etc.) to ‘market’.

    However, the rich and in the case I’ve been witnessing for the past 5 years, involve rich foreigners purchasing vacant land and using the Ag Use exemption for property tax evasion. They have found a loophole and are using it to commit fraud.

    We own a cow-calf operation in a nearby County and understand and am an active participant on what it takes to maintain an Ag Use exemption. If someone questioned our exemption status, we have receipts and records that easily prove our operation is geniune.

    But when you have a neighbor building a 2 million dollar home in a subdivision on the property adjacent to yours and they are paying $500 in taxes vs our $4300 in taxes, something is really wrong with our property tax appraisal system in the area of Ag use!

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