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One way it happens: In much of the U.S., agricultural land is either exempted, or taxed at a very low rate. The stated rationale (besides openly being an agricu

One way it happens: In much of the U.S., agricultural land is either exempted, or taxed at a very low rate. The stated rationale (besides openly being an agriculture subsidy) is as a kind of anti-gentrification measure for farmers. Farmers complain that rising land values, due to e.g. expanding cities, would "price them out" if they had to pay taxes on the full (non-agricultural) market value of the land. In practice it's common for large-scale property investors to use this as a way to accumulate and hold land tax-free or nearly tax-free. At least in Texas almost all large land holdings are held as agricultural land for that reason. Investors keep the land classed "agricultural" until such time as they want to actually develop it. Sometimes this is really agricultural land in addition to being an investment; other times a few gratuitous cows are thrown on some land purely for tax reasons (this is why the city of Houston has a surprising number of tiny cattle ranches within the city limits). The end result either way is that you can accumulate land over long periods of time without paying much in the way of taxes.

xaqfox 12y ago
This loophole was closed in Texas....right around the time that Nolan Ryan brand beef started appearing in the grocery stores.
- _delirium 12y ago
  As far as I know, the basic provision still exists, though some bits have been tightened. There is now a "roll-back" provision that requires agricultural land later taken out of agricultural use to pay back the tax reduction for the past 5 years. That makes it harder to game the exemption for short-term investment. But it leaves longer-term investment plays reasonably intact; you can speculate with land investment in the Houston exurbs as long as you aren't planning to actually develop in the near term. If your investment horizon is 30 years, e.g. because you're betting on population expansion and eventual new freeway construction, you'd still get 25 of those tax-advantaged.
bryanlarsen 12y ago
This is really only a problem for land close to cities. Outside of the cities, agricultural land is taxed at appropriate rates. To be more specific, both a house in the city and 100 acres of agricultural land in the boonies are worth roughly a quarter of a million dollars and pay roughly the same amount of land taxes.

xaqfox 12y ago

This loophole was closed in Texas....right around the time that Nolan Ryan brand beef started appearing in the grocery stores.

_delirium 12y ago
As far as I know, the basic provision still exists, though some bits have been tightened. There is now a "roll-back" provision that requires agricultural land later taken out of agricultural use to pay back the tax reduction for the past 5 years. That makes it harder to game the exemption for short-term investment. But it leaves longer-term investment plays reasonably intact; you can speculate with land investment in the Houston exurbs as long as you aren't planning to actually develop in the near term. If your investment horizon is 30 years, e.g. because you're betting on population expansion and eventual new freeway construction, you'd still get 25 of those tax-advantaged.

bryanlarsen 12y ago

This is really only a problem for land close to cities. Outside of the cities, agricultural land is taxed at appropriate rates. To be more specific, both a house in the city and 100 acres of agricultural land in the boonies are worth roughly a quarter of a million dollars and pay roughly the same amount of land taxes.