Timothy Kelsey

Real property tax burdens on farms are often blamed as one reason for farmland loss in suburbanizing areas. Most states have responded to such loss by creating preferential tax assessment programs for farmland, which base real property taxes on the agricultural use value of the land rather than the land's higher market value. Despite the widespread use of preferential assessment programs, however, there is little evidence that they slow farmland loss or affect land use

This study examines the real property tax burden on farmers in Pennsylvania, using all 8,851 farms in Pennsylvania who had completed the long form version of the U.S. Agricultural Census, and who had $10,000 or more in annual sales. If real property taxes are a relatively small proportion of total farm costs, the farm-level benefit of preferential assessment programs would be relatively small. Real property tax burdens in Pennsylvania are similar to those in other states, falling just about in the middle of all states.

Real property taxes as a percentage of farm gross revenues varied across different farm types in Pennsylvania, with field crop farms on average having the largest burden (5.4% of gross revenues) and dairy farms on average having the smallest burden (1.7% of gross revenues). Average property taxes are generally not large relative to other farm expenses, although for some farms they can be significant. This suggests that simply reducing (or even eliminating) the tax burden through special tax assessments likely will not have a large impact on most Pennsylvania farms.