By Carol B. McPhail
Large-scale landowners can thank an amendment to the
1901 constitution for a large break on tax bills.
Amendment 373 allows most timber land and farmland to be
taxed on its "current use" - not on what its worth, where its
located or what the owner plans to do with it in the future.
This amendment and accompanying laws strip away part of
the tax base needed for education and other services, costing Alabama
an estimated $25 million to $30 million a year. The system may be fundamentally
unfair to the typical homeowner who cant qualify for such a break,
but its the law.
"Its an egregious act designed to legally abate taxes
for landowners all over the state," said Keith Ward, director of the
Center for Governmental Services at Auburn University.
Amendment 373 took root at a time of fear.
Alabama was undergoing land reappraisal in the 1970s, and
owners worried that taxes might soar. Gov. George Wallaces tax
package of 1978 placed a new cap on the amount of taxes that could be
collected and changed the way land was assessed. It amended the constitution
to require legislative approval and an election before property taxes
could climb. Wallaces package also introduced the concept of current
The 1901 constitution had made it tough for communities
to tax themselves. The anti-tax sentiment among the constitutions
white authors was a holdover from Reconstruction, when voters were taxed
to provide public services for freed slaves.
Anti-tax sentiment stayed strong through the years, but
with new forces behind it special-interest groups with large
They got the Legislature to pass a classification system
that stuck utilities with the highest tax rates and gave farmers, timber
growers and residents the lowest rates.
It was within this setting that current use became law. The concept
of applying value to land based on its "current use" was not unique
to Alabama. About 25 other states also applied current use to help farmers
near sprawling cities. That way, a farmer would be protected from sprawls
skyrocketing values, a subsequently higher tax bill and a possible forced
Those other states place values by comparing land to similar
tracts in the taxing jurisdiction. Alabama, however, employed a system
that set a single value for farmland and a single value for timber land
for the entire state.
Special interests made sure they got to write the formula
that determined the values. Ward, who has researched the matter, said
special interests decided on the value they wanted, then worked out
a formula that would arrive at it.
When it was all over, the average value of farmland was
fixed at $443 per acre and timber land at $275 per acrefrom a third
to half the market value in some cases. Those values havent changed.
"It has no relationship to market value and no relationship
to the area of the state or the use of the land for an average acre,"
Paul Till of the Alabama Farmers Federation concedes that
the farm lobby Alfa influenced the current-use formula but says the
calculation also takes into account the type of soil in question. He
defends the system as fair.
Taylor Harper, past chairman of the Alabama House committee that
reigns over state spending, describes chances of changing current use
as "slim and none" given the interests on its side.
"Itd be very difficult to pass ... because of the
powerful lobby of Alfa and the forestry folks and many of your business
organizations that own a sizable amount of land," said Harper, who led
the Ways and Means Committee for eight years through the last session.
"If, perchance, it did pass, I dont know whether the public would
vote for it. The opposition would start a massive campaign."
Tax assessors are responsible for deciding current use
and for making owners pay back taxes when current use no longer applies.
Ward and historian Wayne Flynt of Auburn University contend that assessors
sometimes fear court challenges to their assessments and tend to grant
current use too often.
"Current use really shoots us in the foot. Our property wealth
is really understated," said Sandra Sims-deGraffenried of the Alabama
Association of School Boards.
The impact of current use can astound.
In Montgomery County, a parcel of land was taxed at $1.84 an
acre based on its current use. Later, it sold for more than $200,000,
meaning it could have been taxed at $35,000 an acre, according to Flynt
In Mobile County, land next to Springdale Mall has been claimed
as timber land.
In Fairhope, the owner of a house and half-acre lot valued at
about $41,000 owes 25 times more in property taxes than owners of a
prime piece of Gulf Shores waterfront property valued at $95,000 but
taxed under current use for timber.
Last tax year, three dozen subdivisions in Baldwin County contained
lots that were classified as current use for timber.
Over the years, property taxes have made up a smaller and
smaller portion of the Alabama revenue pie. In 1920, property taxes
provided 63 percent of total state tax revenue. By 1992, property taxes
generated 2 percent.
So Alabama has looked elsewhere for revenue - elsewhere
often being the sales tax, a Depression-era invention. In essence, Amendment
373 shifted the tax harvest to the checkout line, where the landless
pay as much as the landed.
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Reprinted with Permission from the Mobile Register.