Holy Cow! How Senators and Movie Stars Use Livestock to Game the Tax Code
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There are plenty of ways in which members of the 1 percent are able to game the tax code to their advantage. But not many involve cows.
Thanks to a half-dozen heifers he keeps on his land, Sen. Bill Nelson, D-Florida, is a 1 percenter whose livestock helps him gain a tax benefit. As the Miami Herald reported, Nelson was able to save tens of thousands of dollars in property taxes due to the presence of a few cows on property that he owns. Nelson has banked millions of dollars selling parcels of the land, the whole time paying taxes that were far below what he should have paid (according to the market value of the land) because of farm tax credits he was able to claim after letting cows graze on his grass.
"I pay all the taxes owed on the pasture land,” Nelson has said, defending the tax break. But this doesn’t change the fact that the state lost needed revenue on tax breaks that were meant to aid family farmers, but instead went to land that is decidedly not a farm.
Nelson is far from the only wealthy landowner abusing tax breaks meant for farmers in order to gain a financial advantage.
Tom Cruise pays just $400 per year in property taxes on an $18 million estate in Colorado, because a few sheep graze there from time to time. In the same state, actress Goldie Hawn fought to have her land classified as farmland, which lets her pay less than $3,000 in property taxes on 34 acres. After having her land reclassified, Hawn received nearly $38,000 from her county government in refunds for previous tax overpayments.
Over on the East Coast, rocker Bon Jovi receives tax breaks for raising bees on his land in New Jersey, while former presidential candidate Steve Forbes, with a net worth approaching half a billion dollars, claims the Garden State’s tax largesse for raising cattle. In 2000, for property tax purposes, Forbes’ estate should have been valued at $9 million; instead, it was valued at barely more than $100,000, thanks to the cows.
And the list goes on and on. Rep. Jon Runyan, R-New Jersey, receives a 98 percent tax break on his land, because he lets donkeys graze on it and sells firewood. Michael Dell, the founder of Dell Computers, saved $1 million on his property tax bill because he uses his Austin, Texas estate as a deer-hunting preserve for him and his buddies. Even some corporations – including Fidelity – stick cattle on their corporate campuses in order to qualify for tax breaks.
This tax avoidance is able to happen, legally, because nearly every state in the nation has implemented what’s known as “use value” tax policy. Use value lets landowners assess land according to its agricultural value, not according to its actual market worth.
Use value, like many wrongheaded policies, has a good intention at heart. As Citizens for Tax Justice (CTJ) explained, use value is meant to ensure that farmers aren’t pushed into selling their land due to growing property taxes. But the problem is that states have absurdly low barriers for qualifying land as agricultural, letting non-farmers sneak in and collect the tax breaks as well.
For instance, South Carolina sets the bar for qualifying for use value at just five acres of trees or 10 acres of crops. In New Jersey, if you have five acres and $500 in sales, presto!: you own a farm and get to pay a smaller tax bill.