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Fact Check: New national Republican ad mischaracterizes impact of estate, or “death,” tax

A page explaining the Internal Revenue Service's estate tax.
A page explaining the Internal Revenue Service's estate tax.(KCRG)
Published: Jul. 28, 2020 at 6:26 PM CDT
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Source: An ad from the National Republican Senatorial Committee now running in Iowa. It’s the third ad in this race from the NRSC and features a seemingly independent store owner admonishing Greenfield’s values. We’ve fact-checked the other two ads as well and you can read our analyses here and here.

Claim #1: “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: Politifact Iowa, in partnership with the Daily Iowan and I9, analyzed this claim.

What the ad calls a “death tax” is actually called the Estate Tax and has been around long before House Speaker Nancy Pelosi or Theresa Greenfield were born. The modern Estate Tax took effect in 1918, though there were other versions before it, while Nancy Pelosi was born in 1940. It is a tax the federal government places on inheritances over a certain value. Some states also add an estate tax on top of the federal one, but Iowa is not one of them.

The ad is based on an op-ed that Greenfield wrote in October 2017 while running for Congress. In it, she argues President Donald Trump’s tax reform would help the rich and not small businesses or family farms by repealing the Estate Tax.

“Repealing the estate tax, as this bill does, helps the wealthiest Americans – it does nothing for small business owners and farms,” Greenfield wrote.

At the time, the Estate Tax only applied to inheritances worth more than $5.49 million. The Tax Cuts and Jobs Act in 2018 doubled that to $11.58 million. The exemption doubles for a couple inheriting. For perspective, in 2000, estates worth more than $675,000 were subject to the Estate Tax.

Politifact Iowa looked at whether those estate taxes have forces families to sell off small businesses and family farms. According to the Tax Policy Center, a non-partisan Washington-based think tank, only 80 of the 5,500 taxable estates in 2017 were small businesses and farms. The U.S. Department of Agriculture estimated that only 0.35% of farm estates created nationwide in 2018 ended up paying any taxes.

The NRSC points to a few individual examples, like Kevin Kester, former president of the National Cattlemen’s Beef Association, who wrote an opinion piece in 2017 saying his family had to sell parts of its 22,000 acre California ranch to pay off a $2 million tax bill on the inheritance.

Thomas Gelman, a lawyer with Phelan Tucker Law Firm who has been working in estate planning around Iowa City for 42 years, said he has yet to encounter a situation where a family had to sell off a farm or business to pay the Estate Tax.

“The current federal estate tax, with the exemptions that are now applicable, do not force small farmers, in my experience, to have to sell off their farm,” Gelman said.

Gelman said there are ways to structure an estate inheritance to limit the liability or avoid paying an estate tax altogether but, he added, even that has a cost.

“They can become somewhat expensive and complicated to implement, but the federal estate tax is 40 percent. So, on every dollar you save tax on, you’re saving 40 cents. And for people with enormous wealth, it usually justifies the effort,” Gelman told Politifact Iowa.

Conclusion: While it is possible a handful of the largest family farms in Iowa may face an estate tax, it is hard to find evidence it is forcing average farmers and business owners to sell their estates. This claim gets a D.

Copyright 2020 KCRG. All rights reserved.

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