In light of the down economy, Vermont, like many states in our region, is looking for ways to reduce its annual budget. Last year, the legislature attempted to take $1.6 million from the Use Value Appraisal (Current Use) program, a conservation measure that taxes land on its value for agricultural and forestry uses and not on its development potential. The cut failed, but the legislature is expected to attempt to take the same amount or more in the 2011 session. The following are some claims or myths being floated by those who take issue with the program and some facts to help forest landowners counter them.
The current use program is an entitlement program.
In an entitlement program, money is given away to an individual with no expected return. Also, the individual is not required to pay any money into the program at any time.
Under the current use program, land is taxed at a fair and equitable rate based on the current use of the property and not on a potential development or residential rate. In exchange, the forest landowner has to: enter into a long-term contract (which includes withdrawal penalties) with the state of Vermont; pay a consulting forester to develop a long-term forest management plan; harvest timber in accordance with the plan and be overseen by a Vermont county forester; abide in strict accordance with Agency of Natural Resources regulations and terms of the contract; pay to update the plan every ten years; and still pay annual property taxes based on the land’s actual current use. Would you still call current use an entitlement program?
The current use program costs the state of Vermont money.
There are approximately 12,000 property owners who are enrolled in the program, 8,000 of whom own forestland. Of the 5.4 million acres of land in Vermont, 4.5 million acres are forested, and 2 million of these acres are enrolled in current use.
Because the state reimburses towns for “lost” tax revenue associated with current use, the program ends up costing $45 million, or $75 annually for each Vermonter. What return do Vermonters get for this $75? The logging and wood industry alone generates $1.4 billion in revenues annually. Tourism, with over 4 million visitors annually, brings in over $1.0 billion a year. Snowmobiling contributes over $500 million annually, while fishing, hunting, and wildlife contribute $375 million to the Vermont economy. Pieces of that $3 billion find their way into most Vermonters’ pockets.
If your company had overspent in non-income-generating departments, would you jeopardize or adjust a department’s budget of approximately $45 million annually that was a major contributor to generating over $3 billion in annual income?
The current use program only benefits those who are enrolled, and out-of-state residents benefit the most from the program.
The current use program protects Vermont’s working landscape, which provides employment and revenue to its residents, as well as clean air, water, and recreational opportunities to residents and tourists alike. Vermont residents owned 76 percent of the land enrolled in current use in 2006, which tracks closely with how much Vermont land is owned by Vermont residents. Out-of-state owners are not disproportionately enrolled in the program.
The current use program is a tax dodge for developers flipping land sales.
Fears of “land banking” in the current use program are without substance. In 2006, 4,497 acres, or about 0.2 percent of the 2 million acres of enrolled land were taken out of the program. In 2007, 2,700 acres were removed. In 2008, 3,286 acres were withdrawn, and the state collected $654,000 in penalties. At this withdrawal rate, it would take seven years before even 1 percent of land would be withdrawn from the program. And this number does not include the new people who enroll in the program each year.
The more land in a town that is enrolled, the heavier the tax burden on other local taxpayers.
This is a myth. Use value taxation is structured so that towns are held harmless for the cost of the program. The towns are reimbursed by the state and the tax burden is spread equally across all taxpayers in the state. Studies of the cost of community services have repeatedly shown that open or forest land, even in current use, pays more in taxes than it requires in services.
Wealthy landowners “milk” the program.
Seventy six percent of Vermont farms are enrolled in current use, and the program reduced property taxes on dairy farms from $9.4 million to $0.9 million in 2005, effectively increasing net earnings from $10 million to $18 million that year. In 2006, the net earnings for Vermont’s dairy farmers were a loss of $19.7 million and would have been a loss of $28 million without the current use program.
The next time someone complains to you about your land being in a current use program, ask them how they would feel if their house was taxed at commercial development value rather than at its “current use” as a residence. Why should farms and forests that aren’t subdivisions be taxed as if they were?
Trevor Evans, of Derby, Vermont, is the 2010 northeast regional outstanding tree farmer of the year and a board member of the Vermont Woodlands Association.