The farm property tax conundrum
by Larry Davis
Director, Ontario Federation of Agriculture
Last year many Ontario farmers and landowners were shocked by the 2016 Municipal Property Assessment Corporation (MPAC) assessments that saw farmland values increase by an average 65 percent over a four-year period. Ontario farmers had already dealt with similar increases in the previous round of MPAC assessments in 2012. These increases in farmland values, coupled with significantly lower residential and commercial classification increases will lead to farmers shouldering an astonishingly higher portion of local property taxes unless action is taken at the county level.
The Ontario Federation of Agriculture (OFA) has been advocating for fair farmland tax rates across Ontario.
The newly assessed values are being phased in equally over a four-year period (2017-2020). As assessment values go up, property tax bills rise unless specific action is taken to adjust the property tax formula. The formula provides that farmland property taxes will be set at an amount up to 25 percent of the residential property rate. This flexibility in setting farm property tax rates is necessary. It exists to allow municipalities to deal with the uneven increases in farmland value.
The two most widely held principles of property tax fairness are the ability to pay principle and the benefit principle.
The benefit principle states that those who use more services should pay a higher tax rate. The sharp increase in farmland values and resulting tax increases mean farmers will be paying more property tax than ever before, while consuming the same level of services as they always have. Neither the ability to pay or the benefit principle justify such a steep increase in property tax burden for Ontario farmers.
The increase in assessment and property taxes that Ontario farmers face is not reflective of a farmer’s ability to pay more tax. While assessment values are increasing by 65 percent, net farm income is not.
If farm tax bills continue to increase, farmers will be shouldering excessive property tax burdens. Municipalities across the province are already starting their 2018 budget discussions. Now is the time for all county and regional federations to work with their county and single-tier municipalities to adjust the farm tax ratio in their areas accordingly. OFA is available to provide any member or county federation with analysis upon request to help build a case for fair farm tax ratios.
While MPAC is responsible for the farmland property assessments, the farm tax ratio is the responsibility of each county or single-tier municipal government. OFA encourages all members to thoroughly review and understand their farmland property assessments, the impacts the new value will have to their farms and tax rates, and address the tax ratio issue with their local county or single-tier municipality. Ontario farmers should be proud of our valuable land and farm businesses, but will not and cannot shoulder unnecessary tax burdens.