Preserving Agricultural Land via Property Assessment Policy and the Willingness to Pay for Land Preservation

Abstract

In 1995, Wisconsin changed its agricultural land assessment policy from market valuation to use-valuation. The result is a significant reduction in property tax burdens for agricultural landowners. The goal of this legislation is to protect Wisconsin’s farm economy and curb urban sprawl by reducing the costs of retaining fringe land for agricultural purposes. However, agricultural property tax reductions must be compensated for by increases in property tax burdens of the rest of the community. The authors examine the effects of the new assessment policy on households in Muskego, Wisconsin. Specifically, the authors calculate property tax reductions for agricultural land-owners and property tax increases for nonagricultural landowners. The authors then compare actual household benefits (or costs) of this policy with household willingness to pay for land preservation. From this analysis, the authors determine which households receive a net benefit and whether the community as a whole enjoys a net benefit.