“There just hasn’t been a lot of great places to invest,” Paap said. “People have seen ag land as a good place to invest where there’s a decent return on investment.”
So far, growth in farm incomes has more than covered higher property taxes, Paap said. Corn prices, though, may be a dollar or two lower per bushel for the upcoming harvest compared to last year’s.
And while many Minnesota farmers have avoided the catastrophic crop failures brought on by drought in other parts of corn country, every year is a gamble.
Paap said another tax — the estate tax — also can be worrisome for farmers watching land values rise dramatically.
“If we want to keep that farm within the family for the next generation, estate planning is something that has to be looked at,” he said.
The skyrocketing value of their land would have been more of a problem for average farmers if the estate tax exemption had not been raised by the federal government from $1 million to $5 million last year, Paap said.
Blue Earth County farm owners are getting one break on property taxes, particularly if they aren’t within a short commute of Mankato. While tillable land values are going through the roof, the assessed valuations of the home site of homesteaded farm properties is typically not rising more than 1 percent and is actually declining in most cases for homes farther than 15 or so miles from Mankato.
For non-farm property owners, the boom in ag land could mean some property tax relief. The county’s overall tax base will be 14.6 percent higher for taxes payable in 2014 — almost 90 percent of that increase being attributable to the big spike in farm land values. So the burden of paying the county share of property taxes will shift more toward farmers and away from owners of other types of real estate.