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Real Property Taxes And Farm Real Estate Values In North Carolina

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  • Pasour Jr., E.C.

Abstract

Use value taxation for farm real estate and proposals to reduce the use of property taxes in financing local schools have received widespread attention throughout the United States in recent years. This report presents the results of a study designed to provide information necessary to determine how these (or other) proposals to reduce property taxes are likely to affect owners of farm real estate. A brief description is first presented of property taxes as they are administered in North Carolina. A model is then formulated to determine the extent to which changes in property taxes are capitalized into farm real estate values. The average value per acre of farm real estate on a county basis in North Carolina is regressed on the tax rate and four other categories of explanatory variables relating to agricultural productivity of land, farm size, urban influence, and recreational demand. The estimated relationship explained about three-fourths of the variation in farm real estate values. Al 1 explanatory variables had the hypothesized sign. The results indicate that property tax differentials are largely capitalized into real estate values. There are two important implications. First, a capital gain will accrue to the owner of real estate whose value is enhanced as a result of a reduction in the rate of taxation on real property. Second, the decrease in property taxes wi 11 be less than the decrease in the tax rate. The estimated relationship was used to analyze (1) the effects of a decrease in property taxes for farmers versus other property owners, (2) the effect of substituting state taxes for local property taxes, and (3) the potential effect of 1973 legislation providing for present use value taxation for farm real estate in North Carolina.

Suggested Citation

  • Pasour Jr., E.C., 1973. "Real Property Taxes And Farm Real Estate Values In North Carolina," Department of Economics and Business - Archive 259738, North Carolina State University, Department of Economics.
    • Handle: RePEc:ags:ncbuar:259738
    DOI: 10.22004/ag.econ.259738
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    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Frederick D. Stocker, 1971. "A New Look at Farm Property Taxation (abstract)," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 53(5), pages 908-908.
    3. Hammill, Anne E., 1969. "Variables Related to Farm Real Estate Values in Minnesota Counties," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 21(2), pages 1-6, April.
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    Cited by:

    1. Stam, Jerome M. & Sibold, Ann Gordon, 1977. "Agriculture and the Property Tax: A Forward Look Based on a Historical Perspective," Agricultural Economic Reports 307674, United States Department of Agriculture, Economic Research Service.
    2. Hyman, D.N. & Pasour Jr., E.C., 1973. "Reducing Property Taxes In North Carolina: An Economic Analysis," Department of Economics and Business - Archive 259537, North Carolina State University, Department of Economics.
    3. Chang, Sun Joseph, 2018. "Forest property taxation under the generalized Faustmann formula," Forest Policy and Economics, Elsevier, vol. 88(C), pages 38-45.
    4. Danielson, Leon E., 1981. "The Rural Real Estate Market In North Carolina," Department of Economics and Business - Archive 259552, North Carolina State University, Department of Economics.
    5. Chang, Sun Joseph, 2018. "Forest valuation under the generalized Faustmann formula with taxation," Forest Policy and Economics, Elsevier, vol. 88(C), pages 46-51.

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    Keywords

    Land Economics/Use; Public Economics;

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