REAL PROPERTY TAXES AND FARM REAL ESTATE VALUES IN NORTH CAROLINA

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.


Issue Date:
Aug 01 1973
Publication Type:
Report
Language:
English
Total Pages:
56




 Record created 2017-07-14, last modified 2017-08-29

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