Echoing Gov.-elect John Kasich’s pledge to cut taxes, Ohio’s incoming agriculture chief recently called for the elimination of the state’s estate tax.
The tax has contributed to the declining number of family farms in Ohio, said State Rep. Jim Zehringer, a Republican from Northwest Ohio whom Kasich recently picked to lead the state’s Department of Agriculture.
"Ohio is losing over 700 family farms a year, some of them just to pay the inheritance tax," Zehringer said at a Nov. 16 news conference at which Kasich introduced him as the new agriculture director.
Kasich, a Republican who defeated Democratic Gov. Ted Strickland in November, has specifically called for the elimination of the tax, which Zehringer referred to as the inheritance tax, because he believes it punishes success. An estate tax is levied on the net value of an estate before its assets are transferred to anyone else.
PolitiFact Ohio decided to take a look, given the farming remains one of Ohio’s key industries.
First we looked to see if the number of family farms actually is decreasing at the rate Zehringer claims.
Rob Nichols, a spokesman for John Kasich, said Zehringer based his claim on the United States Department of Agriculture’s statistics, specifically, an agricultural census the department conducts every five years.
For his assessment, Zehringer compared figures for one classification of family farms. The USDA, however, also counts "family-held corporations" within its definition of family farms, according to Amanda Pomicter of the USDA’s National Agricultural Statistics Service. Family-held corporations represent only a fraction of family farms in Ohio, but their inclusion does color the picture of how fast the number of family farms are shrinking in the state.
Here is a comparison over the last 15 years of the figures Zehringer used and statistics that include family-held corporations.
Year Family farms only Family farms and corps
1992 60,936 62,538
1997 69,123 71,099
2002 70,890 72,579
2007 66,382 69,131
Nichols told us that Zehringer used the most recent of these five-year stretches for his assertion. Ohio lost 4,508 family farms in that span for an average of about 902 farms a year. If the statistics Zehringer used showed a 900-farm-per-year decline, why did he ballpark the annual losses at 700? He was being conservative, Nichols said.
Had Zehringer also included in his analysis farms owned by family-held corporations, he might have reduced the annual decline even further.
In the same five year stretch, using the figures the USDA prefers, Ohio lost 3,448 family farms for an average of 690 lost farms per year.
The U.S. Department of Agriculture won’t begin counting farms for its 2012 census until the end of that year, so the figures for 2007 represent the most recent available data.
Another point of clarity is needed for Zehringer’s assertion that the state’s inheritance tax is causing the state to lose family farms.
John Kohlstrand, a spokesman for the Department of Taxation, said the state does not have an inheritance tax. He said inheritance taxes apply to each individual who receives property from an estate.
Ohio has an estate tax, which is levied on the net value of an estate before its assets are transferred to anyone else. In e-mails, Nichols told us that was what Zehringer was referring to and that it is "universally known" that some family farms are sold because the estate tax could not be paid.
In Ohio, estates worth $338,333 or less are effectively exempt from the state estate tax due to a tax credit, which is available to all estates, of up to $13,900. A 6 percent tax rate applies to estates worth between $338,334 and $500,000. For estates worth more than $500,000, the tax is $9,700 plus 7 percent of the estate’s value. A federal estate tax also exists. It was phased out in 2010 as part of the Bush tax cuts that are set to expire at the end of the year, pending an extension by Congress.
The U.S. Agriculture Department does not track how many family farms are lost due to estate taxes, said James Ramey, director of the Ohio field office of the USDA’s National Agriculture Statistics Service.
Neither does the Ohio Farm Bureau Federation. But Joe Cornely, the bureau’s spokesman, said Zehringer is "absolutely right" that the Ohio estate tax contributes to the decline in family farms. Sometimes a chunk of a farm is sold to pay federal and state estate taxes and, as a result, the farm is no longer commercially viable, Cornely said.
The federal estate tax is more burdensome, but "inheritance taxes, regardless whether it’s state or federal, can have negative consequences on the heirs," he said
The food and agriculture industries are a $98 billion business in Ohio. The loss of family farms, particularly in light of Kasich’s commitment to job creation, is sure to be something the incoming Agriculture chief will monitor.
Zehringer’s data is somewhat dated, and he didn’t include all types of family farms in his analysis. His statement is not far off the annual decline found in Ohio using statistics the USDA prefers. And ultimately, the differences in numbers don’t impact his underlying point.
As for the estate tax’s role in the decline, it’s difficult to say exactly how many family farms were lost for that reason. But Cornely, an authority on Ohio agriculture, said his is sure "some" of the loses would be due to taxes.
We rate the statement True.