Increasing Property Taxes Impact Land Owner Returns and Equilibrium Land Values

Since 2008, per acre property taxes in Illinois have increased substantially. These increases lower returns to farmland owners and magnify the losses associated with lowering cash rents. If per acre property taxes have reached a permanently higher level, equilibrium farmland values should be expected to adjust downward. Per acre property taxes in Illinois increased in recent years, as is illustrated in Figure 1 for high-productivity farmland in central Illinois. Between 2008 and 2016, property taxes increased at a rapid rate, increasing from $24 per acre in 2008 to $53 per acre in 2016. During this eight year period, property taxes increased an average of 9.6% per year.