What do Tom Cruise and Florida Senator Bill Nelson have in common? Both have taken advantage of a lax definition of what constitutes farming in order to reap large property tax breaks.
The Miami Herald reports that by allowing a few cows to graze on 55 acres of his land, Senator Nelson reduced his property taxes on the land from over $45,000 to just $3,696 in 2011. The reduction results from the fact that a few cows make Nelson’s property suddenly agricultural land, and as such, its value is a mere $210,000, rather than its full market residential value of $2.7 million.
Using a similar tax break in Colorado, Tom Cruise was able to pay only $400 in property taxes on his $18 million, 248 acre tract of land in Colorado by allowing sheep to graze on it for brief periods each year. The good news for Colorado taxpayers is that the state legislature has since taken a small step toward closing the loophole by valuing residences on ‘agricultural land’ at the same rate as they are on residential property.
Rather than just tightening up eligibility requirements though, lawmakers could instead replace current agricultural land valuation systems with an agricultural circuit breaker that makes property tax relief available only to real family farms. This would not only ensure that Senators and movie stars do not abuse the system, it would also better target those farmers most in need of property tax relief – the farmers for whom the tax loopholes were presumably written in the first place.