Farmland Tax Policies Work Against Preservation

October 10th, 2001 by New Jersey Future staff

A farmstead in Franklin Township. © Nicholas T/Flickr

Experts estimate at least half of New Jersey’s farmland is owned not by farmers, but by land speculators and developers.
One good reason is New Jersey’s overly generous tax policies, which grant preferential property tax breaks to active farmland, but impose minimal tax penalties when that land is sold for development.
Tightening New Jersey’s farmland tax policies will not hurt real farmers, but will end the taxpayer subsidy of land speculators, and help deter the development of remaining farmland.

New Jersey, as virtually all other states, helps its farmers stay profitable with preferential property tax treatment. Known as “farm-value assessment,” this tax policy sharply reduces the property tax on “actively devoted farmland.” This policy, in itself, makes sense. Farmland asks so little in public services, compared to tract housing and office parks.

The rub comes when the farmland is sold for development. Then, New Jersey attempts to recoup some of the earlier tax breaks by levying a “rollback tax” that requires the farm owner to pay the difference in taxes between the farmland value and the real estate market value for the past two years.

In reality, this penalty is insignificant when compared with the profits realized by selling the land for development. It’s also insignificant against the tax breaks already received.

New Jersey Future endorses the recommendation of the New Jersey Conservation Foundation (our valued nonprofit colleague in land conservation issues) to increase the rollback to 10 years or more, and to dedicate these funds to the state farmland preservation fund. We also believe in limiting preferential tax assessment to places where property owners enter into a long-term agricultural commitment, and where other land policy measures (the absence of sewer extensions, for instance) apply.