OPINION: Will the state’s farm tax bills help Alaska farmers?

The COVID-19 pandemic exposed cracks in Alaska’s long, tenuous food supply chain. Our governor responded by convening a Food Security Task Force and selling state land for farm use. Yet farmland is still too expensive for Alaska farmers, keeping them from producing more food here. Now, the 33rd Legislature has chimed in. Two bills were introduced this session that, if passed, would change the way our state taxes farm property. Yet while both bills attempt to make farming more affordable, the debate around the bills has exposed a need for better research into how tax incentives affect Alaska farmers. We all want to ensure our small, family farmers can grow and sell more local food; we do not yet know whether these tax changes serve that end.

Currently, state law gives farmers a discount on their property taxes for farmland. While most property is taxed for its full and true value, meaning the land’s value reflects all possible ways to develop it, Alaska Statute 29.45.060 says farmland is taxed only for its farm use. Looking at a property only for its use as a farm means it will have a lower value, which means a lower property tax. A farmer can only qualify for this farmland discount if they derive at least 10% of their gross annual income from farming, and the discount does not extend to farm structures. The proposed bills set their sights on these key points.

Senate Bill 161, introduced by Sens. Jesse Bjorkman and Shelley Hughes, would change the 10% rule to instead require that farmers derive at least $1,000 from agricultural products, which includes crops for human consumption, livestock feed and grazing. It would also apply the farmland discount to farm structures, not just the land.

House Bill 317, introduced by Representatives Benjamin Carpenter and Frank Tomaszewski, would require all municipalities to put to their voters whether or not farm structures, alone, should be tax-exempt, not just discounted. HB 317 does not change the 10% rule. (HB 317 would also ensure farm structures are at least discounted, as with the land, if local municipalities failed to pass the total exemption).

Are these bills competitors or companions? (Notably, Sen. Bjorkman, who introduced SB 161, and Rep. Ben Carpenter, who introduced HB 131, have filed their intent to compete for the same Senate seat in October.) More importantly, do either of these bills make it easier for small Alaska farmers to grow more local food? The answers are not clear without more research into the financial and social impacts.

As an example, take the key change in SB 161: shifting the eligibility requirement from 10% of income to $1,000 of farm income. Some farmers with other jobs say the current 10% requirement makes them ineligible because the income they derive from non-farm employment is too high. They could not have 10% of their annual income from selling hay when they make $80,000 per year at their other job. With SB 161, their other sources of income would not matter. As long as they sold $1,000 worth of agricultural products, they would get the discount.

I have heard this argument from large landowners whose farm activities are not their primary source of livelihood. I have also heard it from some small farmers who are forced by our current economy to have a second job, even though they would prefer farming full-time. That second job often means they cannot derive 10% of their income from farming.

However, I have also heard opposite arguments from small farmers who say the change to $1,000 of agricultural products might entrench ownership in the hands of a very small number of landowners, keeping it out of reach of smaller farmers. It might also entice speculators to purchase farmland solely as a tax write-off, outbidding actual farmers.

I trust that Alaska farmers know what is best for farming up here, and when members of the same group of small, family farmers come down on different sides of an issue, that says to me: “We need to learn more.” I invite others to collaborate on better research and advocacy, so that we help Alaska farmers feed Alaskans. Without more, we’re in the dark.

Clay Venetis is the director of Fairbanks Farm Access, a research and advocacy organization benefiting small farmers. In October 2023, he helped farmers in Fairbanks organize the vote to pass a total tax exemption for farm structures.

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