Groundwater Utilization and Tax Policy

Abstract

S INCE the early 1950's, groundwater has been used to expand irrigation in the arid and semiarid regions of the United States. Present irrigation from groundwater supplies is concentrated in the western states, but some irrigation from groundwater supplies is found in the more humid parts of the nation. Although statistics are not readily available with which to estimate precise acreage irrigated from groundwater supplies, the groundwater resource appears to have become an important resource to agriculture, both in terms of expanding production of the drier climates and in terms of supplementing precipitation in other areas. In some of the arid and semiarid regions, groundwater is the most limiting economic resource in that groundwater is not present in sufficient quantity to permit irrigation of the available land resource. However, further exploration may result in the discovery of new groundwater deposits which would increase the physical quantity of the resource both in the vicinity of present irrigated areas and in areas heretofore not irrigated. The discovery, development, and use of groundwater by irrigated agriculture has, in effect, resulted in an increase in productive capital. The overburden formerly classified as dryland cropland or dryland grassland can be shifted into irrigated cropland, or the underlying groundwater can be pumped and transported to other sites and put to several different uses, including irrigation. The purpose of this paper is to present discussion pertaining to major issues regarding effects of taxation upon the use and ultimate value of groundwater as a capital resource. The discussion will be centered around property taxes, as opposed to income, sales, or capital gains taxes. The form of the property tax under consideration is the ad valorem tax applied to assessed resource value.