What if Alabama taxed its timber at a higher rate?

This story is a part of Ask Alabama, where you ask the questions, you vote to decide which questions we answer, and then we investigate. This question comes from Bill Bennett in Birmingham. If you want to have your question answered, click here.  

If Alabama taxed timberlands at a rate equal to the average rate in the Southeast, how much additional revenue would be raised?”

The good news for Bill is that there is an answer to his question, but the bad news is that it’s extremely complex.

In a follow up email to Reckon, Bennett said that he felt like property tax on timberland could be at least tripled without much harm to the property owners. He cited property tax bills in the double and triple digits on land worth between $100,000 and $800,000, respectively.

But before we get into the figures, let’s start with the basics of timber tax in Alabama and why attempting to make direct comparisons between states is problematic. 

When it comes to timber, there are predominately two ways that the most states gather tax dollars.

The first tax, and the one that raises the largest revenue of the two, is property tax, which is the land on which the physical timber stands. In Alabama, timberland is classified as agricultural land and is therefore taxed at 10 percent. However, calculating the land value so it can be taxed at this rate depends on a range of criteria such as soil productivity and local millage rates, which is a complex calculation that can vary from state to state and from county to county. Plus, the land is taxed on how it is being used, rather than what it would fetch on the open market. This is known as Current Use taxation and almost always ensures that the landowner pays way below land’s fair market value, which is usually how other properties are assessed. The reason for the lower taxation on timberland is because most farmers do not use the land for its most profitable use on a year-to-year basis. Often the land will be unproductive for…

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