Tax Plan Weakens Current Use
Much of Alabama’s farmland would be taxed at the same market values as shopping malls and subdivisions under Gov. Bob Riley’s $1.3 billion tax plan, and even smaller farms could see their state property taxes increase by more than 550 percent.The property tax measure, which the Alabama Legislature passed June 7, would raise $470 million a year. The governor’s tax package could go to the voters in a statewide referendum as early as Sept. 9.Under the plan, all Alabamians who own cars, trucks or boats, or whose homes are valued at $52,280 or more, would pay more taxes. But farmers would be hit especially hard. The tax package would radically change the valuation of farmland for tax purposes by limiting land which qualifies for current use to 2,000 acres. In addition, the current use value of good cropland would increase from $532 per acre to $650 per acre. Current use valuation for acreages above 2,000 would be phased out over a four-year period. Any land not qualifying for current use would be taxed at fair market value.The governor’s original bill valued cropland at $824. The Legislature had changed it to $750, but hard work by friends of farmers reduced that to $650 before final passage of the bill.The final bill includes a farmstead exemption of up to 200 acres for a family-owned farm as long as the family lives on the farm, or an exemption for up to $150,000 annually of the assessed value for land improvements such as farm buildings and fences. The acreage may be non-contiguous.Farmers, however, won’t be the only Alabamians who will pay more, if voters approve the tax package.Under the Riley plan, all property would be taxed based on 100 percent of its assessed value at the state level. Currently, homes, farms and timberland are taxed based on 10 percent of their assessed value; businesses, 20 percent; utilities, 30 percent; and vehicles, 15 percent. The plan also lowers the state millage rate from 6.5 mills to 3.5 mills and raises the homestead exemption from $40,000 to $50,000. That means a family living in a $150,000 home would pay $278.50 more a year in state property taxes–an increase of 390 percent. In addition, that same family would pay $100 more a year in taxes on their two cars (based on a total market value $40,000).Property taxes, however, account for less than half of Riley’s total tax package. He expects changes to state income tax laws to generate an additional $421 million.State Finance Director Drayton Nabers Jr. said these changes could reduce the state income tax bill for a family of four with an annual income of $70,000 by as much as $150 a year. However, the plan’s elimination of all income tax deductions except mortgage interest, charitable contributions, medical expenses and adoption expenses would likely result in a higher tax bill for those who itemize their deductions.For example, a family of four making $70,000 with itemized deductions totaling $17,070 (under the current plan) would pay $392 more in state income taxes under the Riley plan, an increase of 18.5 percent.Other provisions of the Riley plan include doubling the filing charges for mortgages and deeds; charging sales tax on the labor portion of automobile and appliance repairs; and increasing the sales tax on cars.