A new report by Gregory Weaver of Fresnoland on California’s Williamson Act adds to the unrelenting stream of news about the disproportionate power and influence of America’s wealthiest citizens. . The report by Fresnoland, a nonprofit newsroom and policy research lab launched by the Fresno Bee, examines the highly unequal distribution of tax benefits under the Williamson Act.
Per this 1990 report by the Agricultural Issues Center at UC Davis, the Williamson Act, passed in 1965, allows property owners in participating counties to sign contracts with the county that provide landowners with reduced property tax assessments in exchange for restricting the development of their land. County participation is voluntary, although as of 2020, the CA Department of Conservation reported that 52 out of 58 counties had signed contracts with landowners. At its inception, the Act provided for partial reimbursement of the lost local tax revenue by the state, but state funding for the program ceased in 2010, leaving counties to absorb the loss of revenue themselves.
The intent of the Williamson Act was pro-rural, as it was meant to protect California agricultural land from urban and suburban sprawl that was rapidly encroaching on rural areas in the mid-20th century. By lowering property taxes, the Act’s drafters sought to help farmers hold onto land that they might otherwise have been tempted to sell to real estate developers seeking to build the next subdivision.
Williamson Act tax breaks have been exploited by large conglomerates and investors to generate larger returns on their investment in massive industrial farming operations. Fresnoland’s analysis found that “just 120 mega-farms – less than 1% of recipients – are capturing half of the program's $5 billion tax shelter,” while the majority of farmers receive less than $800 in tax breaks per year.
Under standard property tax formulas, agricultural landowners are taxed based on the purchase price they paid for the farmland. However, if they enroll in the Williamson Act, they instead pay a much lower tax rate calculated using the land’s potential rental value for agriculture, [Fresno County Assessor Paul] Dictos said. This preferential tax structure applies to all farmers enrolled in the Williamson Act. But Dictos said it’s the deep-pocketed investors who acquired prime farmland in recent years who see the largest tax reductions. The result of this tax formula is that the higher the purchase price, the bigger the Act’s tax subsidy, Dictos said. Small farmers and landowners who have owned their land for generations see hardly any benefit under this tax formula, multiple assessors from across the state told Fresnoland.
The Williamson Act property valuation mechanism has led to a discrepancy in tax benefits in which small and medium-sized farmers in Fresno County “are subsidized $24 per acre, while the top mega-growers get $62 per acre.” In Fresno County alone, Williamson Act tax benefits lowered county revenue in 2022 by $50 million below what it would have been absent the subsidies, and over the last 30 years the Act has resulted in a total decrease of $820 million in revenue, most of which has gone to the largest and wealthiest owners of agricultural land.
Instead of providing a boost to local small farmers, most of the benefits go to large corporations that need no government assistance. Some of these tax breaks are going to investors far outside the county, including the second-largest subsidy in 2022 going to a $240 billion pension fund for the Royal Canadian Mounted Police, and the fifth-largest subsidy going to Gladstone, Inc., a corporation whose purpose is “actively acquiring” agricultural land across the U.S. The report also found that nearly all of the land owned by mega-farmers that receive these benefits are more than a mile from any city. Thus, the land is not even “at risk of being paved over by encroaching suburban sprawl.”
This outcome strikes me as profoundly unjust and something that the California legislature should rectify. At a time of increasing wealth inequality, providing tax breaks for wealthy investors and corporations to further buy up and consolidate farmland has the primary effect of selling out localities and rural areas that could use the tax revenue for schools, roads, and social services. The issues with the Williamson Act are not unique to California, as experts have observed that the farm "subsidy system is literally undermining the economic and social foundation of rural communities."
Given recent consolidation trends in U.S. agriculture, lawmakers should examine how exactly the Williamson Act is "saving" agricultural land and formulate new policy that actually helps small farmers who live and work in rural parts of the state. Providing financial benefits to large companies who use more water-intensive, extractive agricultural methods provides a sustainable future for only those companies.
Leaving rural agricultural land to the whims of the free market leaves those with fewer resources open to exploitation by moneyed interests. The same economic forces that compel small farmers to sell to industrial agricultural operations are those that led many people in Solano County to sell to the folks from California Forever (further discussed here, here, and here).
It seems as though tax incentives to protect rural land inevitably end up being exploited by sophisticated investors, as is the case with conservation easements. And protecting existing landowners and creating incentives that drive up land prices only makes it that much harder for those, such as young people and immigrants, who do not already have extensive resources to start new farms.
There are myriad other agricultural laws and policies that are intended to support farming in California and the U.S. more broadly. Yet the agricultural industry continues to move away from the subsistence model towards large, extractive, profit-seeking ventures. California should take a hard look at how the Williamson Act contributes to that trend and imagine better ways to support the people who live in rural areas rather than aiding those who simply extract profit from them.
For more discussion of the Williamson Act, see:
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