Fact Checker

Fact Checker: Ad about 'death tax' harming Iowa farms mostly false

The National Republican Senatorial Committee is running an ad criticizing Democratic challenger Theresa Greenfield. (Scr
The National Republican Senatorial Committee is running an ad criticizing Democratic challenger Theresa Greenfield. (Screenshot from ad)

A committee working to elect Republicans to the U.S. Senate has released attack ads against Theresa Greenfield, the Democrat vying for incumbent Joni Ernst’s seat on Nov. 3.

The National Republican Senatorial Committee is running two ads online and on television criticizing Greenfield for her support of an estate tax. In a 30-second TV spot released in mid-July, an Iowa farmer named Bob Witt states that “Greenfield supports Nancy Pelosi’s death tax. This liberal tax punishes family farms … and forces them to sell off instead of passing on to the next generation.”

Analysis

First, we’ll check the claim that Greenfield supports the federal inheritance tax. Then we’ll review whether this tax has forced families to sell their farms.

The Fact Checker team reached out to the National Republican Senatorial Committee for sources. A spokesman pointed to an op-ed in the Shenandoah-based newspaper written by Greenfield in November 2017. At the time, Greenfield was campaigning for Iowa’s 3rd Congressional District. In her op-ed, Greenfield opposed a Republican proposal to repeal the estate tax.

”Graded

She writes, “Repealing the estate tax, as this bill does, helps the wealthiest Americans — it does nothing for small business owners and farms. With so many of the tax breaks in the House bill going to corporations and pass-throughs, our farms will be left holding the bag.”

So Greenfield does support the federal tax. However, in providing its sourcing, the National Republican Senatorial Committee did not clarify why it attributed the tax to Pelosi, speaker of the U.S. House.

The federal estate tax was first established in 1916 and has been the subject of many reforms since. The most recent iteration was established under the Tax Cuts and Jobs Act of 2017, which Pelosi voted against.

The Tax Cuts and Jobs Act of 2017, which ultimately passed in December 2017, doubled the estate tax exemption level from its original ceiling of $5.49 million per individual.

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The Tax Policy Center, a Washington, D.C.-based nonpartisan think tank that conducts analysis of tax policy, estimates that 4,100 estate tax returns were filed in 2019, which accounts for only 0.15 percent of decedents of about 2.7 million people who died that year. Only about 0.07 percent paid an estate tax, the Tax Policy Center states, totaling to about $15.6 billion in taxes.

Now, let’s take a look at whether the estate tax forces Iowans to sell off family farms.

The federal tax on property and assets transferred from deceased individuals to their beneficiaries applies only to those assets valued above $11.2 million per person or $22.4 million per couple, according to the Tax Policy Center. Iowa does not have its own estate tax.

In 2018, the average farm size in Iowa was 356 acres, according to the U.S. Department of Agriculture. Of the 86,000 total farms in the state in 2018, the majority are family owned and operated — even those that reached at least $1 million in total sales, which make up less than 10 percent of all farms in Iowa.

Among the 6,400 farms with gross annual sales of $1 million or more, 94 percent are family owned and operated. Of farms with 10,000 acres or more, 86 percent are family run, according to data from the USDA.

But under current federal law, many family-owned farms should not qualify for this tax, even the mega farms.

According to the USDA, small family farms that bring in $350,000 or less in revenue each year account for 90 percent of all farms nationwide.

The USDA found in 2018 that of 38,106 farms nationwide, 230 estates — or 0.6 percent — would be required to file an estate tax return. However, only 0.35 percent of those 230 estates — or 80 farms nationwide — ended up paying the estate tax.

The average value of an acre of farmland in Iowa is $7,432, according to the 2019 Iowa State University Iowa Land Value Survey.

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So if the average farm size is 356 acres, that means the total farm value on land alone would be $2.6 million — still a far cry from the $11.2 million exemption for individuals. Granted, that doesn’t take into account the value that may be tied up in other assets.

The National Republican Senatorial Committee pointed to a position statement against the estate tax from American Farm Bureau Federation. In the statement, the organization argued that since 91 percent of farm and ranch assets are not liquid, and instead are tied up in land, equipment and buildings, that few farmers have enough cash on hand to pay an additional tax.

The organization argued that this policy “not only can cripple a farm or ranch operation, but also hurts the rural communities and businesses that agriculture supports.” The federation also stated, though. that increasing the exemption to $22 million per couple in 2017 has been a great benefit to farmers.

Even when the exemption level was $5.49 million per individual in 2017, only 0.2 percent of Americans owed any estate taxes, according to the Center on Budget and Policy Priorities.

It should also be noted that there are provisions made under federal law for farms and other small businesses that make concessions for those inheriting these estates, according to the Congressional Research Service. Farm heirs have the ability to defer payments for up to five years, excluding interest. In addition, provisions allow for additional reduction in estate value up to $1 million if the land’s use is restricted to farming for the next 10 years.

Conclusion

According to data, most farms in Iowa that are family owned and operated would not meet the threshold of at least $11.2 million to trigger the federal estate tax. It is possible this policy could impact wealthier Iowans, but there is no evidence that farmers had to sell their estates as a result of this tax.

The claim is correct that Greenfield supports the tax. But data shows the claim’s depiction of the consequences is not accurate. We give it a D.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/officeholder or a national candidate/officeholder about Iowa, or in ads that appear in our market.

Claims must be independently verifiable.

We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

This Fact Checker was researched and written by Michaela Ramm of The Gazette.

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