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TFB State Director Don Smith testified recently before the House Ways and Means Committee in Austin.
By Lana Robinson
Field Editor
Texas Farm Bureau was well represented in its efforts to retain open-space land and agricultural inputs exemptions, Feb. 9, when Dist. 5 State Director Don Smith of Sulphur Springs testified before the Texas Legislature's House Ways and Means Committee in Austin.
Smith, a veteran dairyman and beef producer in Hopkins County, vigorously defended the current agricultural use valuation for property tax purposes and sales tax exemptions on inputs as critical components to the future success of the state's agricultural industry.
"Agriculture is the third largest industry in Texas. Without the special tax considerations afforded to the industry, you would quickly see this status plummet," said Smith. "...in Texas, ag-use valuation and sales tax exemptions benefit producers of livestock, row crops, specialty crops as well as all commodities across the board. When, as an industry, we compete in what is now a global market, it is even more important that we maintain this competitive edge."
Smith reminded lawmakers of the intricacies of the statute and its purpose. He said Article 8, Section 1-d-1 of the Texas Constitution allows "open-space land" to be appraised based on its "productive value" as farm or ranch land. The land, said Smith, must be used for agriculture at the level of intensity typical for the local area to qualify. He also pointed out that the provision allows for local control of the designation of open-space land.
"In other words, the County Tax Appraiser grants the designation of open space. The law does not address who owns the land, only the use of the land. The purpose of the law is to keep land in agriculture regardless of ownership. In this regard, the law even provides for a penalty for the removal of land from agricultural use," he stated.
Smith also noted that questions have often been raised regarding applying an income test for open-space designation.
"Originally, Section 1-d had an income test that stipulated the landowner must derive their primary source of income from agriculture to qualify for the agricultural valuation," he told lawmakers. "However, many agricultural producers could not meet the income test required by the constitution under Section 1-d. Agriculture was changing in Texas and the law changed with it. As Texas has shifted from a rural to urban state, many landowners involved in agriculture are not deriving a majority of their income from agriculture production."
Smith said the issue is complicated further with many spouses assuming off-farm employment. In addition, said Smith, many agriculture producers lease their land from absentee landowners. In those instances, Smith made the case on behalf of Texas Farm Bureau that it would be unfair to the tenant farmer or rancher to tie the valuation of agricultural land to the income of an absentee landowner who lives in the city.
Smith emphasized the delicate balance that exists in the food chain, from the production end of the farmer and rancher, to the processor and ultimately the consumer. He predicted that changes in the tax structure at the production level would have significant impacts upon the other sectors of the economy. He urged members of the Legislature to carefully evaluate potential impacts before making any major changes to the tax structure.
"I have been involved in production agriculture my entire life and can tell you that without our special tax considerations, I would not be in the business today. That likely will not change in six years or the next 60. The agricultural industry cannot pass increased costs on to others in the market. We are 'price takers,' not `price makers,'" he said.
