Agricultural Land Is Becoming an Investment Vehicle for the Rich
Mark Zuckerberg doesn’t work the land on his Hawaii ranch, but he and other wealthy landowners still benefit from huge agricultural tax breaks. The scheme allows the superrich to hoard wealth at the expense of the general public.
A planted farm field on Kauai, Hawaii. (Jon G. Fuller / VW Pics / Universal Images Group via Getty Images)
While the large-scale sugarcane plantations that dominated the local economy for more than a century have all been shuttered, agricultural land remains a hot commodity on the rural Hawaiian island of Kauai.
Thousands of acres of farms and pastures once held by scions of plantation-era aristocracy are being gobbled up by new-money billionaires and global investment firms. These lands make for appealing additions to an investment portfolio not only for their prime location and skyrocketing value, but because they are eligible for a huge agricultural tax break program that saves landowners millions on their property tax bills.
Recipients of these breaks include Meta billionaire and world’s thirteenth-or-so richest man Mark Zuckerberg and his wife Priscilla Chan, who save upward of $300,000 in property taxes each year on their 1,400-acre north-shore ranch.
On one 560-acre parcel of land purchased for $50 million in 2021, Zuckerberg and Chan (or the LLC that owns the land on their behalf) get a 90 percent discount on their property tax bill, because ranching occurs on the property. On another 110-acre parcel purchased for $17 million, the couple paid only $730 in property taxes last year. (For scale, owners of a neighboring five-acre property, which doesn’t qualify for the tax breaks, owed more than $7,000 last year despite the property being valued at less than $1 million.)
On an island where millionaires and billionaires abound and limited agricultural land tends to be highly consolidated — a vestige of the plantation economy when the “Big Five” sugarcane corporations carved up massive chunks of the territory — Zuckerberg is far from the only member of the superrich club to profit.
The largest beneficiaries by far are the Robinsons, eccentric descendants of a family that, with $10,000 in gold, managed to buy up about one-seventh of Kauai and the entirety of the neighboring island of Niihau during the days of the Hawaiian monarchy. Keith Robinson, a self-described “right-wing extremist” who frequently writes rambling diatribes to the local paper about the encroachment of government “eco-nazis,” is a recipient of enormous government largesse through this preferential tax treatment. In 2022 the Robinsons paid just $1,557 in property taxes on a twenty-four-thousand-acre agricultural property valued at $88 million, and similarly massive breaks are scattered throughout the rest of their patchwork of land holdings.
On the south shore, AOL billionaire Steve Case’s development corporation gets a 50 percent discount on its tax assessment for one 2,882-acre agricultural parcel. Billion-dollar Colorado investment firm Brue Baukol Capital Group cut more than 75 percent off its assessment for one recently purchased 1,500-acre tract.
And these sorts of agricultural property tax breaks are far from unique to Kauai. Every state in the union offers some sort of preferential tax treatment for agricultural land, effectively subsidizing private ownership of farms and ranches.
ProPublica’s 2021 reporting laid out how, through an array of borrowing schemes, deductions, and write-offs, the uber-wealthy manage to pay unconscionably low federal income tax rates — with the twenty-five richest Americans paying a true tax rate of only 3.4 percent. But reporting on state and local property tax breaks, and agricultural tax breaks specifically, remains limited. These huge discounts for agricultural land are yet another piece of tax policy that allows the superrich to hoard more and more wealth at the public’s expense.
“Saving the Family Farm”
Agricultural property tax breaks began appearing in the late 1950s, as rampant suburbanization inflated the values of agricultural land, leading to concern that small farmers would be pressured into selling off to developers. Over the ensuing decades, states and counties steadily began adopting the policy of use-value assessment, which artificially deflates the taxable value of farmland, often by more than 90 percent.
Jennifer Ifft, a professor of agricultural economics at Kansas State University, described the push for use-value assessment as collaboration between the environmental movement and pro-farm groups. “The idea was that they would be pro-family farms, and address concerns about green space and urban sprawl,” she told Jacobin.
Whether use-value assessment has been effective at achieving either of these objectives is dubious. A 2015 report from the Lincoln Institute of Land Policy is skeptical, saying that evidence that the policy helps preserve small family farms is “weak, at best.” The report points to the fact that American farms are now often owned by higher-net-worth households as possible evidence that the tax breaks haven’t been saving small family farms, and that farms have instead been consolidating into wealthier hands. Farm-operator households make a higher median income than US households, and their median wealth is more than double — $2,100,879 in 2021, according to the US Department of Agriculture (USDA).
The Lincoln Institute report concludes: “Policy makers need to ask whether or not wealthy taxpayers with high incomes deserve substantial tax breaks for owning rural land.”
As for preserving green space, researchers determined that while certain programs appear to have slowed the rate of development, that effect is temporary, at best postponing the date when landowners choose to sell or build.
What is clear is that the loss of tax revenue can have a brutal impact on cash-strapped local governments, taking huge bites out of state and county budgets. Public schools, which are often funded through property taxes, are especially hard hit. The use-value appraisal of farm, ranch, and forested lands reduced the property tax base in Texas by more than $2.9 billion in 2013. Unsurprisingly, Texas public schools trail the country in per-pupil funding by thousands of dollars. A Monterey County, California preferential treatment of agricultural land cost the municipality $1 billion in 2011. Kauai’s agricultural tax break program cost $8 million last year, according to the county finance director, and in a small county, the effect of this missing $8 million is clearly visible during the annual budget process. Those lost revenues must be replaced by higher taxes on other (usually poorer) people or cuts to social services. On an island facing a massive housing crisis — the median home price often tops $1 million — affordable housing projects often find themselves wanting for that missing funding.
The numbers are difficult to quantify on a national scale, but Ifft estimated that the total loss of tax revenue is likely comparable to federal farm welfare programs like crop insurance — which pays out about $100 billion each decade. Compare this to the cuts made in this month’s debt ceiling theater piece — the increased age for work requirements for SNAP recipients will save just $6.5 billion over ten years. There’s a lot more money to tap through reforming tax giveaways than by cutting already bare-bones welfare programs.
Trickle-Down Tax Breaks
Mark Zuckerberg doesn’t spend much time baling hay and tilling fields, of course. Large landowners generally lease part of their land to actual farmers or ranchers, whose work makes them eligible for tax break programs.
About 40 percent of all agricultural land, and a majority of cropland, in the United States is rented, according to a 2014 survey. While agricultural tax breaks can certainly make life easier for the people that actually own their land, for the many farmers who lease land from agricultural landlords, the benefits are less clear. Kauai leasehold rancher and county council member Billy DeCosta said that margins for leasehold farmers are tight, and rents on ranchland have been increasing locally.
“You’re paying 150 dollars (in rent) on three acres, and you can sell a cow for 500 dollars — you’re basically making 350 dollars,” he said. “But that’s not including your medicine, your tags, your branding, your feed, your vaccines. The profit margin is not that great.”
These leasehold farmers will become more common in coming years as agricultural land gains popularity as an investment vehicle for corporations and billionaires. Big investors began taking interest in farmland in the early 2000s, and it became a particularly valuable asset in the wake of the 2008 financial crisis, as the wealthy scrambled for safe places to stash their money. Agricultural land is sought for its stability and steady increase in value, along with the fact that, due to climate change, it is projected to become increasingly scarce this century. That agricultural property taxes can be next to nothing certainly contributes to the appeal.
Bill Gates began buying up big tracts of land in 2013, and is now the largest owner of farmland in the country, with 270,000 acres. Other billionaires like Bezos, Buffet, and Ted Turner are in on the game as well, each controlling thousands of acres. Though land held by investors doesn’t yet make up a huge percentage of total agricultural land, the amount of investor-owned land has certainly been growing — to the extent that young farmers looking to buy land are being priced out of the market.
Part of the rationale for preferential tax treatment of agricultural land is the hope that tax savings will trickle down to leasehold farmers in the form of lower rents. Does this pan out? Maybe, sometimes. There is no public oversight on those decisions.
Asked about the tax break last year, a Zuckerberg representative pointed to the hundreds of thousands of dollars he does pay in property taxes, his efforts at conservation, and the tens of millions of dollars he has donated to various charities on the island.
It’s true that Zuckerberg’s local donations are probably worth more money than the island could realistically make by fully taxing his property. But relying on charity is an unreliable and undemocratic way of funding social goods and services. More important than the total dollar amount is clawing local funding decisions back from private interests and into the public domain. Whether to fund housing or education or support leasehold farmers are choices that should be made by the people, not millionaires and billionaires that happen to own land.