Property Tax Incidence on Cropland Cash Rent

Abstract

AbstractWe estimate the property tax incidence on rented cropland, defined as the extent to which landowners can increase cash rental rates to shift the tax burden of property tax to renters. Using Ohio's Current Agricultural Use Value (CAUV) Program, we are able to avoid issues where the market value of farmland determines the property tax as CAUV assesses farmland in Ohio based on a use‐value formula with historical and state‐wide prices, yields, and costs of corn, soybeans, and wheat. Our results indicate that cash rental rates in Ohio from 2008 through 2017 increased between $0.31 to $0.40 for each additional dollar of property tax levied on cropland in the short run. Further specifications taking into account lagged effects of property tax indicates a higher incidence of $0.61 higher cash rent for each additional dollar of property tax, although this is dispersed over a 3‐year time period.