When farmers wrap up harvest and open property tax bills, some will be in for a nasty surprise.
Bill Toews of Kane certainly was. The retired farmer says the total tax bill (municipal and education) on one of his quarter sections in the Rural Municipality of Roland jumped $1,004, up 30 per cent from last year to $4,351. That’s $27 an acre in taxes.
In 2016 the same quarter saw a 61 per cent increase in taxes relative to 2014. Toews wasn’t alone then and isn’t this year either.
“It’s not fair anymore,” Keystone Agricultural Producers (KAP) president Bill Campbell said in an interview Oct. 18 while combining barley on his farm near Minto.
“The bare land does not send kids to school. It’s the people… so why do we base my tax bill on land and yet somebody in town just pays on their house?”
Why it matters: Farmers are paying more than other taxpayers as farmland values rise and other properties, like houses, stagnate. This approach doesn’t fairly reflect the ability of farmers to pay, some say.
In 2016 farmland taxes jumped dramatically across most of the province. One Red River Valley farmer saw his taxes double. The unprecedented increases prompted some farmers in the rural municipality to delay paying their taxes in protest.
Property taxes are driven by property values. As values increase so do the taxes. Famers are willing to pay their fair share, Toews said, but the burden, especially for school divisions in farming areas, has dramatically shifted to farmers because of rising land prices, and away from other property owners, creating inequity.
“I know for a fact that some residences have started to pay less education tax on property because of the assessed value of farmland, especially in the Red River Valley, because the land is so valuable,” Brad Curtis, superintendent of the Red River School Division headquartered in Morris, said in an interview Oct. 17.
“Farmland (values) the last 10 years have just jumped through the roof. The residential properties haven’t. You could see some houses paying less now than they did five years ago and see farmers paying two or three times as much.”
The assessed value of Toews’ quarter is up 37 per cent from last year. Coincidently, the education tax bill from the Red River School Division on that land is also up 37 per cent or $800.
Property taxes are based on two main components — the assessed value of property and the mill rate set by municipalities and school boards.
Farmland taxes vary with the value of land and the needs of the local municipality and school division. Total taxes on a quarter section of land in the Rural Municipality of Lorne owned by this reporter and a family member are up almost 13 per cent from 2017. While the education tax portion is up just seven per cent, municipal taxes went up 22 per cent.
The assessed value of the land was up 18 per cent.
Doing the math
How farmland taxes are determined.
The Manitoba government’s assessment branch determines the assessed value of farmland every two years based on its market value multiplied by a portioning factor assigned to that property class. Manitoba has 10 property classes, including farmland, residences, businesses, pipelines and railways.
The portioning factors for farmland and residences, are 26 and 45, respectively. So the assessed value of a quarter section of farmland with a market value of $1 million, is $260,000 ($1,000,000 X 25% = $260,000).
The amount of taxes on that property will be $260,000 multiplied by the mill rate.
Municipalities and school boards set their operating budgets and then adjust their mill rates to collect from taxpayers the money needed to cover those budgets.
Traditionally when property values jumped municipalities and school boards reduced their mill rates accordingly, but that doesn’t help farmers when the assessed value of farmland has skyrocketed relative to other property.
The Manitoba government ordered all school divisions to cap their tax increases to local taxpayers at two per cent, which the Red River School Division did. Still on that one quarter Toews’ education tax bill jumped 37 per cent, underscoring how the tax burden shifted to farmers.
While some argue that’s fair given higher land prices boosts farmers’ net worth, Campbell counters “it doesn’t reflect your ability to pay.”
Higher land values make farmers wealthier on paper, but to capitalize the land must be sold and then you’re no longer farming, he added.
KAP has suggested to restore fairness municipalities should reduce the portioning factor assigned to farmland. If municipalities won’t do it individually the province should order them to, KAP has said.
KAP delegates passed a resolution last November calling on the Manitoba government to fund education through personal and corporate income taxes and by taxing residences.
KAP members also passed a resolution asking the Manitoba government to remove the cap on its farmland education tax rebate program, which refunds 80 per cent of the education tax on farmland up to a maximum of $5,000.
In 2015 the cap cost farmers $7.5 million in rebates, then KAP president Dan Mazier told the meeting. He estimated the cap would cost farmers $10 million in 2016.
Farmer input needed
KAP is counting on a Manitoba government review of the public kindergarten to Grade 12 education system, to begin in 2019, to find a fairer tax system for farmers, Campbell said.
Asked for more details, a Manitoba government official emailed the following statement: “The K-12 review will include public consultation on a wide range of topics and Manitobans will be encouraged to voice their concerns and suggestions on how to improve the education system.”
Campbell said it’s important for farmers to take part in the consultations.
“We need to get people engaged because this is not going in the right direction,” he said.
“There seems to be almost an acceptance by urban people that this is all right and this is good. But as long as their taxes remain in line or reducing, they’re hidden from the realities of what is actually happening with the demands of our school divisions.”
As an interim measure KAP wants the Manitoba government to reduce the portioning factor assigned to farmland, Campbell said.