Wealthy “Faux Farmers” Get Huge Agricultural Tax Breaks on Their Properties

Submitted by Elaine Magliaro, Guest Blogger  

According to T. S. Elliott in his poem The Waste Land: “April is the cruellest month.” I think many of us would agree because April is the month in which we Americans are required to file our annual income taxes. And thinking about who is actually paying taxes these days, has really gotten my dander up.

Today, while many working class and middle class people are trying hard to survive from paycheck to paycheck and when millions of Americans are out of work and unable to find new jobs that pay them a living wage, it’s hard to accept the fact that huge corporations like GE may not be paying any taxes at all while receiving tax rebates. It’s also maddening to see millionaires and billionaires who blew a hole in our economy and nearly caused a financial meltdown getting bailed out with OUR tax dollars.

It appears that the ultra-rich get all the breaks. Still, it seems many of them keep looking for different ways to hold onto their wealth by avoiding taxes while letting those of us who are less fortunate financially pay more than our share. Some of the well-heeled have even found a way to pay less than their fair share of local property taxes. They do that by claiming their large estates and properties as agricultural land. Here are the names of some of the “faux farmers” in New Jersey who have had their real estate taxes drastically reduced: Malcolm “Steve” Forbes, Jon Bon Jovi, E Street Band drummer Max Weinberg, Publishing magnate Donald E. Newhouse, former CEO of Commerce Bank Vernon Hill II, and Robert Wood “Woody” Johnson IV, heir to Johnson & Johnson and owner of the New York Jets football team.

Wealthy gentleman “farmers” haven’t just been gaming the system in New Jersey—they’ve been doing it in Texas, Florida, Iowa, Colorado, Alabama, and in many other states across this country. The tragedy of this tax avoidance by those who can well afford to pay more is that it is costing local governments the revenue they need to run their communities properly.

Several years ago, Art Cory, who was the chief appraiser for Travis Central Appraisal district in Texas, said: “It just seems to me that everyone ought to pay their fair share. That’s not happening now (American-Statesman, 2003). In regard to the agricultural tax break, Cory added, “You can go out and cut some brush, put out some feed and count the deer once a year and qualify.”

According to an article in The Nation, that’s what Michael Dell did with his second home—a suburban ranch in Austin. Because he hunted there periodically and maintained a “well-managed deer herd,” he was able to reduce the property’s 2005 market value from $71.4 million to an agricultural value of $290,000. That saved Dell—but cost Texas—$1.2 million. In 2007, The Wall Street Journal reported that Korea’s Samsung Electronics was able to qualify for a “wildlife management” agricultural tax exemption on more than fifty acres of land outside its semiconductor plant in Austin simply by erecting some birdhouses, eradicating ants, and taking a wildlife census. By doing that, the company reduced its tax bill by nearly 100%–from $21, 080 to $135! It’s sad to note that all the agricultural tax breaks in Texas have cost public schools in the state $1.5 billion in lost revenue.

A Few More Examples of Agricultural Tax Breaks

Colorado: Assessors in the state were reported to have said that even parking lots have qualified for agricultural tax breaks after some cows were brought in to graze on grassy strips between lanes. (Common Dreams)

Florida: Walt Disney World has received a farming tax break on 1,600 acres where it grows plants for its theme parks. At the time this was reported, the land owned by Disney was actually valued at $194 million but was taxed on a value of $12.3 million. (Common Dreams)

Alabama: In Mobile County, Ala., Delaney’s Inc. has planted pine seedlings on 54 acres left over after building a Hampton Inn, Marriott Courtyard, Lowe’s and Wal-Mart. This “tree farm” has been subdivided and laced with paved streets in preparation for development, and local officials insist that the land is not suitable for growing timber. But the developer’s lawyer pointed out that the law doesn’t require Delaney’s to be a good farmer — just a farmer. The result: a 2003 tax bill of $152 instead of $64,230. (Common Dreams)

Here are more details on the wealthy  “faux” farmers who have been getting agricultural tax breaks in New Jersey from New Jersey: “Fake” farms get tax breaks (Asbury Park Press)

The rolls of those with farm-assessed land in New Jersey read like a who’s who in the world of high finance, business and entertainment. Those in the rich-and-famous category with approved applications for tax breaks in 2009 and 2010 include:

— Financier Michael C. Price, with a net worth of $1.4 billion, Bedminster: 92 farm-assessed acres, on which he paid $359 in taxes in 2009.

— Robert Wood “Woody” Johnson IV, heir to Johnson & Johnson and owner of the New York Jets football team, Bedminster: 269 acres, $1,470 in 2009.

— Publishing magnate Donald E. Newhouse, with a net worth of $5.4 billion, Hopewell Township: 273 acres, $1,787 in taxes for 2010; in West Amwell, 77 acres, $611 in taxes in 2010.

— Publishing magnate Malcolm “Steve” Forbes, including properties with his wife, Sabina, Bedminster: 450 acres, $2,005 in taxes in 2009.

— E Street Band drummer Max Weinberg, Middletown: 34 acres, $122 in taxes in 2010.

— Rock star Jon Bon Jovi, Middletown: 7.1 acres, $104 in taxes in 2010.

— Lamington Farm Club, under the corporate umbrella of entrepreneur and TV personality Donald Trump, Bedminster: 195 acres; $277.

— John Whitman, husband of former Gov. Christie Whitman, Tewksbury: 167 acres, $1,521; in Bedminster: 65 acres; $173.

— Vernon Hill II, former CEO of Commerce Bank, Moorestown: 29 acres, $79 in 2010.

Now, let’s take a closer look at just one of the New Jersey “farmers” on the list above—Malcolm “Steve” Forbes. I bet you didn’t know that Forbes was into animal husbandry, did you? Well, Forbes actually raises show cows on his property, which qualifies for the agricultural tax break because it generates at least $500 in revenue annually. From The Center for Public Integrity (2000): “His New Jersey farm meets the state’s revenue test, with about $5,500 in yearly income, and he gets the federal write-offs for raising cattle, too.”

The Center for Public Integrity also reported the property that Forbes owns would have been valued at $9 million if he didn’t stock it with his show cows. An assessor had estimated that the land would be assessed at only $160, 531 because of the cows. So…Forbes paid a paltry $2,215 tax bill on his 449-acre estate because prize bovines were grazing there.

Well, there you have it, folks. That’s just one of the ways that the rich hold onto their riches. It’s also one of the ways that our cities and towns are losing out on essential tax revenues that are needed to pay for schools and other community services .

Because April is National Poetry Month, I’ve written another song parody for you in honor of Malcolm “Steve” Forbes:

Old Steve Forbes…He Had a Farm

A Song Parody By Elaine Magliaro (To be sung to the tune of Old MacDonald Had a Farm)

Old Steve Forbes

He had a farm.

E-I-E-I-O

And on that farm

He raised show cows.

E-I-E-I-O

He had moo-lah here.

He had moo-lah there.

He had lots and lots of moo-lah

Everywhere.

Old Steve Forbes

He had a farm.

E-I-E-I-O!

 

He milked them cows

For tax breaks. True!

E-I-E-I-O

He didn’t need

The money though.

E-I-E-I-O

He had moo-lah here.

He had moo-lah there.

He was a greedy billionaire.

Old Steve Forbes

He had a farm.

E-I-E-I-O

 

Old Steve was

A farmer—faux.

E-I-E-I-O

He knew how to make

His riches grow.

E-I-E-I-O

Did you hear him say

He’ll keep making hay

While all the little people pay their

E-I-E-I-DOUGH?

SOURCES

This Tax Day, ‘Farms’ Owned by the Rich Provide Massive Tax Shelter (The Nation)

Property Taxes Are For Parasites: Billionaires Use The “Fake Farm Loophole” To Not Pay Any… (Exiled Online)

Senate panel OKs rollback of some Colorado ag-land tax breaks (The Denver Post)

Faux Farmers Milk the System (Common Dreams)

Steve Forbes Cattle Farmer (The Center for Public Integrity)

New Jersey’s Farmland Assessment Act

Why Texas Firms Are Keeping Cattle On the Back Forty (Wall Street Journal)

Owners of $250 billion in property benefit from exemptions, loopholes amid school crisis (Statesman)

“Fake Farmers” Cost N.J. Taxpayers Millions (CBS Local, NY)

“Fake” farms get tax breaks (Asbury Park Press)

99 thoughts on “Wealthy “Faux Farmers” Get Huge Agricultural Tax Breaks on Their Properties”

  1. As a current farmer, knowing other farmers, let me give you a few morsels of thought:

    Part 1, Taxes:
    For small operators, the only programs from the Government that were worth any cash value were EQIP programs to mitigate environmental impact, administered by the USDA NRCS.

    Recently, after a pilot program, that’s grown to include one moderately small “high tunnel” – an unheated greenhouse.

    These are cost-shares, not grants, nor subsidies. No one pays me not to grow Arugula, or tomatoes. No one pays my goat farmer friend to not milk goats or make cheese. No one pays either of us, nor gives Ag land exemptions to any of my friends as they’re all small operators. You can’t live on and farm the same parcel of land, you must have a 5 acre “homestead” and a separate agricultural parcel defined by deed. Then the ag land can be taxed at a non-residential rate, be that “tree growth” or “agricultural” or “current use (fallow)” classifications.

    Farm Services Agency will provide low-interest loans to VIABLE farms, with a history of credit decline from ‘traditional lenders’. It’s still a loan, with a lien.

    Part 2, Lead Contamination:

    To lead in the soil, it’s an issue for all urban farmers, and for those on former orchards. There’s a difference in lead present, and motile lead absorbable by plantlife. In general, if there’s lead present, you want to lime the soil to raise pH levels above 6.5, as the lead is then stabilized.
    Sure, you don’t want to be feeding unwashed root crops to your children, but the plants will not uptake elemental lead from the soil in the form of oxides. Better still, forego the root crops, unless peeled – and grow crops which can either be mulched to isolate them from soil exposure, (spinach, tomatoes) or grow sufficiently tall crops (as corn would be) to eliminate soil contact.

    While I adore mushrooms, and particularly the morels one finds in old orchards, I’d limit the number of them consumed unless one could have them analyzed in a lab.

    That said, I’ll also make the assumption that as morels like either an area with a recent burn or limestone based soil, such as the traditional orchard areas of New York.
    With a more alkali soil, the pH will be higher than here in much of New England were morels are rare (our soils are often pH 5.3-5.5 as granite is acidic), and it’s assumed they occur in areas of pH 6.0 or higher with greater regularity.

  2. pete

    if you were to inoculate the soil of areas known to have lead problems with underground fungi systems, would they contain the lead in any significant way / discouraging dust etc.?

  3. It sounds basically hopeless to collect high lead contents in soil short of just moving the entire soil to a different location. Maybe it would help if they put a layer of uncontaminated soil on top.

  4. Kay,

    To speak to your question to me earlier today: I think people of means who truly believe in setting aside land for migrating animals, for wildlife preserve, etc., can do that best by donating land–instead of asking for tax breaks on land they own.

    In Massachusetts where I live, some wealthy families donated land to an organization called the Trustees of Reservations. Now we have a beautiful beach in Ipswich and an organic farm in Ipswich and Hamilton–thanks to them. We also have many other properties in our state that we know will be preserved in perpetuity and never developed for profit.

    http://www.thetrustees.org/

    Here are some of the places owned by the Trustees of Reservations that my husband and I are happy have been given over to their care and supervision:

    http://www.thetrustees.org/places-to-visit/northeast-ma/agassiz-rock.html

    *****

    I have more links for you. I can only include two links per comment.

  5. rafflaw
    1, April 18, 2011 at 9:15 pm
    Blouise,
    It makes more sense than saying that the gays caused all those disasters!

    ===================================

    Exactly …

  6. rafflaw,

    I have decided that these people are an abomination upon the land and are responsible for earthquakes, tsunamis, hurricanes, tornadoes, flu bugs, halitosis, and warts.

  7. kay

    most plants that i know of don’t pick up lead in the soil, it wasn’t in the apples that were grown in the orchards. the problem would be more ground water or dust/airborn for the construction workers and landscapers. also for children playing in it. not sure which plants might or might not pick up the lead but if there is it would be a good way to collect for disposal.

  8. How to Pay No Taxes
    Source: Business Week
    By By Jesse Drucker
    April 15, 2011
    http://sanders.senate.gov/newsroom/news/?id=1b9903a2-1944-4107-a8ea-4e5116fdb51e

    Excerpt:
    ELEVEN SHELTERS, DODGES, AND ROLLS-ALL PERFECTLY LEGAL-USED BY AMERICA’S WEALTHIEST PEOPLE

    For the well-off, this could be the best tax day since the early 1930s: Top tax rates on ordinary income, dividends, estates, and gifts will remain at or near historically low levels for at least the next two years. That’s thanks in part to legislation passed in December 2010 by the 111th Congress and signed by President Barack Obama.

    “This is clearly far and away the most generous tax situation that’s existed,” says Gregory D. Singer, a national managing director of the wealth management group at AllianceBernstein (AB) in New York. “It’s a once-in-a-lifetime opportunity.”

    For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate-what they actually pay-fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS. And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so.

    That’s not just good luck. It’s often the result of hard work, as suggested by some of the strategies in the following pages. Much of the top 400’s income is from dividends and capital gains, generated by everything from appreciated real estate-yes, there is some left-to stocks and the sale of family businesses. As Warren Buffett likes to point out, since most of his income is from dividends, his tax rate is less than that of the people who clean his office.

    The true effective rate for multimillionaires is actually far lower than that indicated by official government statistics. That’s because those figures fail to include the additional income that’s generated by many sophisticated tax-avoidance strategies. Several of those techniques involve some variation of complicated borrowings that never get repaid, netting the beneficiaries hundreds of millions in tax-free cash. From 2003 to 2008, for example, Los Angeles Dodgers owner and real estate developer Frank H. McCourt Jr. paid no federal or state regular income taxes, as stated in court records dug up by the Los Angeles Times. Developers such as McCourt, according to a declaration in his divorce proceeding, “typically fund their lifestyle through lines of credit and loan proceeds secured by their assets while paying little or no personal income taxes.” A spokesman for McCourt said he availed himself of a tax code provision at the time that permitted purchasers of sports franchises to defer income taxes.

    For those who can afford a shrewd accountant or attorney, our era is rife with opportunity to avoid, or at least defer, tax bills, according to tax specialists and public records. It’s limited only by the boundaries of taste, creativity, and the ability to understand some very complex shelters.

  9. The Top 10 Tax Breaks — And How They Help The Wealthy The Most
    Huffington Post, 4/18/2011
    By Dan Froomkin & Jake Bialer
    http://www.huffingtonpost.com/2011/04/18/the-top-10-tax-breaks-_n_850534.html

    Excerpt:
    This is the time of year when we are most aware of our tax burdens. But what we may be less aware of are all the huge tax breaks built into our system. Most Americans benefit from one or more — but it’s the wealthy who benefit the most.

    The government spends money through appropriations and writing checks, but it also showers individuals and companies with a astonishing array of special exemptions, credits and deductions that amount to a $1.1 trillion giveaway each year. (For comparison: the big budget fight that concluded last week cut spending by about $38 billion.)

    About half of the money lost to “tax expenditures” comes from the 10 breaks listed below.

    Few of the biggest breaks directly benefit corporate America. Most are widely distributed among the population and are meant to reward and encourage what is generally considered responsible behavior. Each break also represents a powerful, and in some cases broad-based, constituency.

    But in stark contrast to, say, social programs, tax breaks vastly favor the rich over the middle class and the poor.

  10. End ‘Tinkle Down’ Economics
    Katrina vanden Heuvel
    The Nation
    April 18, 2011
    http://www.thenation.com/blog/159999/end-tinkle-down-economics

    Excerpt:
    Here’s a modest proposal on this tax day 2011. Tax investments like ordinary income.

    For thirty years, we’ve been treated to the big whopper that cutting taxes on the rich creates jobs. Let’s get real. Trickle-down—or, as my good friend Jim Hightower likes to call it, tinkle-down economics—hasn’t worked. Case closed. After George W. cut taxes for his rich pals, far fewer jobs were created than after President Bill Clinton raised them in the 1990s.

    Then in December, the Obama-GOP deal extended the Bush tax cuts for the wealthy at a two-year cost of about $70 billion a year. Now Congress is making $40 billion in painful budget cuts this year. Meanwhile, President Obama, Representative Paul Ryan and others are battling over budgets and tax plans for the next decade and beyond. For the most part, what’s been missing from these suffocatingly narrow discussions is an easy source of income: taxing investments like ordinary income.

  11. Only Little People Pay Taxes
    Why a janitor ends up with a higher tax rate than a millionaire, and seven more charts that show how the richest Americans beat the IRS.
    — By Dave Gilson
    Mother Jones, 4/18/2011
    http://motherjones.com/politics/2011/04/taxes-richest-americans-charts-graph

    Excerpt:
    “We don’t pay taxes. Only the little people pay taxes,” billionaire hotelier Leona Helmsley famously (and allegedly) sniffed. She wasn’t entirely correct: The superrich do still pay taxes. The wealthiest 1 percent of taxpayers pay 32 percent of all income tax collected by the federal government.

    But the superrich don’t pay as much as they used to—and thanks to a combination of tax cuts and preferential tax policies, their tax obligations can be less demanding than the so-called little people’s. In fact, the very wealthiest Americans’ tax burden has been steadily dropping for years, even as they’ve enjoyed astounding income growth not seen by the vast majority of Americans.

  12. REPORT: In 12 Years, Income For Richest 400 Americans Quadruples, Tax Rate Nearly Halved
    By Judd Legum
    Think Progress, 4/18/2011
    http://thinkprogress.org/2011/04/18/tax-disparity-chart/

    Excerpt:
    New data released by the IRS reveals that, over a period of 12 years, tax rates for the richest 400 Americans were effectively cut in half. In 1995, the richest 400 Americans paid, on average, 29.93% of their income in federal taxes. In 2007, the last year for which the IRS has released data, the richest 400 Americans paid just 16.63%.

Comments are closed.