Arizona Sen. Jeff Flake has enthusiastically taken up the mantle of former Oklahoma Sen. Tom Coburn, whose annual "Wastebook" chronicled what he saw as profligate spending by the federal government. Flake, who publishes his own version of the book from his perch in the Senate, has also added companion volumes to the Wastebook, the most recent of which is the "Tax Rackets" report going after a handful of what he calls "outlandish loopholes to lower tax liabilities."
However, it's difficult to know, sometimes, whether Flake's real object with these publications is to root out wasteful government programs or to spin selectively chosen federal policies in the worst light possible, creating the impression that the government is a feckless steward of the public's tax dollars.
Flake, like Coburn before him, has a history of ridiculing scientific research grants without supplying any context about why the sometimes strange or obscure things they study might actually help advance larger efforts to cure diseases or solve environmental problems.
RELATED: 10 ridiculous tax loopholes
10 ridiculous tax loopholes
10 ridiculous tax loopholes
1. Alaskan Whaling Captain Deduction
Alaskan whaling captains can avoid tax on up to $10,000 of whaling-related expenses per year. Costs they can deduct include purchasing and maintaining the boat, weapons and gear, food and supplies for the crew, and storing and distributing the catch.
When a business pays for capital improvements — like building a new office or buying a new machine — it typically deducts those costs over the life of the asset, which could translate into decades. A special exception exists in the tax code for “certain motorsports entertainment complex property placed into service before Jan. 1, 2017,” which refers to NASCAR tracks and other racing facilities. The exception allows businesses to deduct the costs over seven years, which is much faster than usual.
(Onfokus via Getty Images)
3. Hawaii’s Exceptional Tree Deduction
If you take care of an “exceptional tree” in Hawaii, you can deduct up to $3,000 on your state taxes of what it costs you. A local county arborist advisory committee must declare it an exceptional tree and you’ll need an affidavit from the arborist stating the tree’s type and location and what you paid to maintain it. You can take this deduction only once every three years.
(agaliza via Getty Images)
4. Florida’s Rent-a-Cow Deduction
If you live in Florida and want to pay lower property taxes — perhaps on your second home that has a lot of open land — consider renting some cows. Under greenbelt laws, if you use your land for agricultural purposes, your real estate taxes are based on the agricultural value of the land, not its market value.
This deduction doesn’t explicitly state how many cows you have to raise or even that you have to own them. Developers often let a few dozen rented cows roam their land — sometimes even during construction — to lower their property tax bills.
5. New Mexico’s Centenarian Deduction
If you live to be 100 years old, moving to New Mexico will cut your tax bill because you will pay no tax to the state. A caveat: You cannot take the deduction if you claim someone as a dependent. Paying no state income tax might not be a huge break, but if it’s available, take it.
(gece33 via Getty Images)
6. Qualified Performing Artist Deduction
If you’re searching for a tax loophole you can use — one that doesn’t benefit only the 1 percent — the IRS allows qualified performing artists to deduct certain expenses. To qualify, you must have performed for at least two different employers during the year and received at least $200 from each, had business expenses that exceeded 10 percent of your performing arts income and claimed less than $16,000 in adjusted gross income for the year. If you’re married, that $16,000 limit applies to both your spouse’s and your incomes.
(DragonImages via Getty Images)
7. Home Landscaping Deduction
If you regularly see clients at your home office, you might be able to write off a portion of your landscaping costs. The IRS allows a deduction for the portion of your home costs that are related to your home office, so as long as you use your home office exclusively for business, you might be able to take this one. If keeping your lawn looking good for your clients is part of the job, you’re in luck.
(Elenathewise via Getty Images)
8. Personal Pool Deduction
Install a pool for medical treatments and you could be in for a big tax break. One taxpayer suffering from emphysema and bronchitis was prescribed swimming by his doctor as part of his treatment, so he built a pool and wrote off a portion of the costs as a medical expense. He could deduct only the amount by which the installation cost exceeded the home’s increase in value, but he did get to include upkeep costs.
Deducting body oil on your taxes might sound downright crazy, but you might be able to. One professional bodybuilder needed to shine a little brighter during competition so he applied body oil. When tax season rolled around, he included the cost as a business expense. At first, the IRS disallowed the deduction, but the Tax Court approved because using the oil made him more competitive.
(bekisha via Getty Images)
10. Charity Meat Deduction
Meat packers, butchers and processing plants in South Carolina can earn a $75 state tax credit for each deer carcass they process and donate. You must be licensed with the state or the U.S. Department of Agriculture and you must have a contract with a qualified nonprofit that distributes food to the needy. If you use any of the deer for commercial purposes, you will not qualify for the donation.
His last edition of the Wastebook identified some glaring examples of irresponsible federal spending. But it also spent pages and pages attacking government programs that it described in the worst possible light, frequently leaving out or downplaying information critical to understanding them.
The new Tax Rackets book is much the same. The first example identified is the "Alpaca Tax Fleece" in which people looking to reduce their tax liability in any given year can purchase any number of the South American-native creatures and immediately write off the entire cost. Flake's staff identified some truly egregious abuse of the system by people who used the cost of the animals and their care to drive their taxable income to zero for years, and to claim large tracts of property as farmland, thereby greatly reducing property taxes.
Several of the "loopholes" Flake identifies in the report are examples of businesses taking advantage -- in some cases to apparent excess -- of laws allowing municipalities to issue municipal bonds to help finance projects that have a private component. This includes things like public golf courses operated by a third-party contractor, or in one case, a massive mall in New Jersey. Municipal bonds typically carry lower rates because the payments to bondholders are sheltered from taxes.
But other things that come in for Flake's ridicule are more of a stretch.
The book attacks the federal government for what it describes as a "Telemarketing Tax Break."
"As if telemarketers interrupting dinner or waking you from your sleep isn't irritating enough, the tax code is providing a special telemarketing tax break for publishing companies to cover the costs of hiring more operators to call you."
However, the program being criticized is much broader than the headline would suggest and allows publishing companies to write off expenses related to the acquisition of new customers. That includes, but is not at all limited, to telemarketers.
The book also goes into lengthy detail on what it calls the "Chicken Poop Tax Credit," which goes to companies using biomass to create renewable energy with a smaller carbon footprint.
The "tax credits paid for the production of poultry poop power" as Flake puts it, are presented as though they could cost the Treasury $200 million per year. However, that figure is the total for the government's entire open-loop biomass tax subsidy program, which includes not just chicken manure, but plant matter, yard waste, food waste and any number of other materials. To call the subsidy a "Chicken Poop Tax Credit" is more than a little tendentious.
In the end, like the Wastebook, Flake's takedown of the flaws in the country's system of tax expenditures is a hit-or-miss collection of truly egregious abuses and artificially inflated pseudo-scandals that seem more intended to outrage than to identify serious problems.
Your filing status can make a big difference in how much income tax you pay. If you make $40,000 a year, for instance, the amount of tax you will pay depends on which filing status you qualify for. The difference in tax rates are significant and can mean the difference between paying up to 15 percent or 25 percent. Your decision to file single, jointly or as head of household will also affect the size of your standard deduction.
The fees for taking SAT, ACT and other college entrance exams are not tax-deductible, but the federal government does allow a number of educational deductions and tax credits. Find out more about these educational deductions and credits and how they can benefit you.