Policy Advocate, Ag Alert
Reprinted with permission from the California Farm Bureau Federation
Among the pressures facing California farms, ranches and agricultural businesses—economic upheaval from the pandemic, water shortages, trade uncertainty and more—you can add another: a measure headed for the November ballot that would raise taxes on California farmers.
Proponents call the measure the “Schools and Communities First” initiative, and it officially qualified for the ballot last week. If approved by voters, it would raise taxes up to $12.5 billion annually on commercial and industrial property—including California farms, ranches and dairies.
The initiative would create a “split-roll” tax, essentially splitting the property tax roll between business and residential properties. Commercial and industrial properties would be reassessed at current market value at least every three years, while residential properties would retain the full benefit of the 1978 Proposition 13 property tax measure, being reassessed only when sold or when improvements are made.
Proponents of the initiative include California teacher and public-employee unions. They say it’s needed to help fund schools and local government. Proponents also claim the initiative explicitly exempts California farms and ranches, meaning that the same constitutional protections afforded to farmers by Proposition 13 would remain unchanged.
The proponents believed farmers and ranchers would read about an “exemption” of agricultural lands and would be confident they’d remain unharmed by the initiative. Fortunately, California farmers and ranchers have a better understanding of our tax protections and liabilities than the proponents have given us credit for. Now, the proponents are tirelessly attempting to discredit this state’s farming and ranching families, saying we’ve misinterpreted the initiative even though they never reached out to understand how agricultural taxation works.
But, read the initiative. As defined, “real property used for commercial agricultural production means land that is used for producing commercial agricultural commodities.” The language is cleverly deceptive because “real property,” as currently defined elsewhere, consists of three elements: land, improvements and fixtures.
This initiative, however, only exempts land—not any improvements or fixtures attached to that land. Improvements include all buildings, structures, fences and all fruit- and nut-bearing trees and vines not naturally growing. According to the proponents’ own agricultural land fact sheet, agricultural properties such as dairy barns, food processing facilities and wineries would be reassessed at fair-market value, as they would be classified commercial and industrial. Since when is a farmer’s barn or a dairy not considered an agricultural property?
To the farming community, the impacts of the initiative would be severe.
Under Proposition 13, property taxes for residential, business and agricultural property is based on 1% of the purchase price, with annual increases capped at 2% a year. That limits drastic increases in property taxes and helps assure farmers and ranchers won’t be priced out of their land. Removing that protection for barns, dairies, wineries, orchards and vineyards raises costs and reduces profit margins for farms and ranches that are already low-margin enterprises.
Tax increases for agricultural businesses would ripple through the rural economy, as businesses try to reduce their costs in order to pay their higher tax bills. That likely means fewer jobs in already-struggling rural communities. Local businesses that sell farm equipment, supplies and services would also be undermined.
Adding to the financial costs, there would be environmental implications as well. The initiative would give local governments a great financial incentive to rezone farmland for commercial or industrial development—specifically farmland left idled when the full impacts of the Sustainable Groundwater Management Act are realized—and would encourage counties to end participation in the Williamson Act, since doing so would yield them more tax dollars.
Farm Bureau has been monitoring this threat to California farmers and ranchers for more than a year. In fact, the California Farm Bureau Federation was the first agricultural organization in the state to identify the proponents’ deception and announced its opposition to the split-roll property tax measure in February. Following our announcement, other statewide agricultural organizations have also opposed the measure.
We opposed the measure before the COVID-19 pandemic and stay-at-home protocols threw the agricultural economy and the general economy into turmoil. Now, our opposition has become even more urgent. With so many farms, ranches, agricultural businesses and other businesses struggling mightily to stay afloat, this seems a particularly inappropriate time to add to the tax burden facing California businesses.
We take this so seriously that the CFBF Board of Directors determined Farm Bureau would establish its own campaign committee to fight the split-roll initiative on behalf of California farmers and ranchers. As the fall campaign season progresses, watch for information from CFBF and your county Farm Bureau on how you can contribute to defeat this destructive measure.
(Robert Spiegel is a policy advocate for the California Farm Bureau Federation. He may be contacted at firstname.lastname@example.org.)