BLOOMINGTON, Ill. (WCIA) — Some major changes are being proposed in Washington which would increase estate taxes on farms, forcing many farms to be sold — just to pay the taxes.
The tax changes were proposed to finance a number of government programs being rolled out by the White House, but Farmland Value Specialist David Klein of First Mid Bank in Bloomington says there will be some unintended consequences detrimental to land values.
“Farmland values would likely see some pressure as a result of increased supply,” says David Klein. “And so what we would expect to see is more farm families being faced with the option of either borrowing money to keep the farmland or sell the farm. And if they chose to sell farmland in order to raise capital to pay those taxes, that would increase the supply and could potentially increase the supply significantly in some areas.
“Recently Gary Schnitkey, Nick Paulson, and Krista Swanson, came out with a white paper from the U. of I. and mention that between 50 and 70 percent of Illinois grain farms would actually potentially be impacted by a tax in some form or fashion. That number is significantly more than usual. Dr. Sherrick over at the U of I has mentioned for years that farmland has very low tax liability on it right now which is what makes it a very stable asset. When you start increasing the number of properties with leverage on them, then as a result you end up with potentially more possibility of things needing to happen if things get a little tight and that increases the supply.”
With more land on the market, demand and value drop. Following a visit with the National Corn growers Board, Chairman David Scott of the House Agriculture Committee has taken that adverse message to the White House.