Des Moines Sun

For 120 years, the Rhinehart family has farmed outside Boone, growing crops and the farm itself.

The farm has passed from Hiriam Rhinehart to his son Cleo Rhinehart to Greg Rhinehart. Today, Greg and his wife, Polly, are transitioning the family business to their son Daniel.

But there is a looming threat to this family tradition.

Polly and Greg Rhinehart | Facebook

President Joe Biden’s proposed “American Families Plan” taxes on inheritance would increase because the plan will eliminate a provision allowing heirs to report the value of assets at the time of inheritance.

This allows heirs to avoid gains taxes completely if they sell the assets immediately. The new plan will require heirs to pay gains taxes on the increase in value of their inheritance during the lifetime of the deceased. The tax is intended to target very wealthy heirs inheriting their parents’ fortune.

This tax also would have a large impact on family farmers passing down the farm. Farmers in Iowa say this creates a big tax burden on heirs because of how much farms can increase in value throughout the lifetime of the previous owner.

Chris Hagenow, president of Iowans for Tax Relief, warns, “When it comes to passing down a family farm to a niece or a nephew, the tax liability can result in selling the whole farm or significant pieces of the farm off simply to pay the tax bill. There is no question that an inheritance tax is a significant burden on families' farms and their continuity.”

The tax would apply to inheritances valued at more than $1 million, which would include the value of plots of land owned by the farm.

Greg Rhinehart, 69, has worked at Rinehart's Family Farm, as the agricultural business is known, for more than 45 years.

The farm includes more than 900 acres, both owned and leased. The family produces corn, soybeans and vegetables, including sweet corn, tomatoes, green beans, asparagus, zucchini — “everything that can be grown in Iowa for a farmers’ market,” Greg Rinehart told the Des Moines Sun.

They used to have livestock on the farm, but he and Polly, 67, decided to move into vegetables as a way to involve their 10 children. It’s worked well, with their vegetables a popular offering at local markets, restaurants and stores.

“Fresh-picked sweet corn is wonderful,” he said.

The farm has grown over the decades, Greg said, a point of pride. The family had a plan in place to turn the farm over to Greg.

But a drastic change in the inheritance tax law could change that.

“It would greatly impact him, tremendously to the downside,” Greg said. “It would have a great impact on farmers, all farms, and family businesses.”

He said Daniel, 31, has already began assuming control of the farm as he and Polly step away from daily management of the farm. Three other children are involved as well.

But if this proposed change goes through, the family’s plans could be destroyed.

“Yes, we probably would have to sell some of the land to pay the taxes. It would be very devastating to all farms in Iowa,” Greg said. “We’ve already planned a succession plan. We’ve been going by the rules for many years, transitioning. That’s how I inherited the farm, and now Daniel will inherit the farm. Also some of the other kids will inherit part of the farm.”

He said the price of land has risen so dramatically, most farmers don’t have the cash on hand to purchase it. It’s the same issue other small business owners face, and why the change in tax policy could be so impactful.

He said preserving the farm is a major concern. Why?

“The heritage and the history and the tradition and just the family hard work, that has gone into building this farm and growing the farm,” Greg said. “And living on the land. It’s a huge legacy to pass along to your kids and grandkids, and honoring our parents and grandparents and great-grandparents.”

But while the Rhinehart family produces food, politicians debate policies that could impact their lives and work.

House of Representatives Ways and Means Minority leader Kevin Brady (R-Texas) said such a change could devastate many farm families.

“Democrats have pledged to repeal ‘stepped-up basis,’ which is what makes it possible for a family business — like a farm — to pass from one generation to the next without being forced to sell off assets to pay an enormous tax bill to Washington,” Brady said.

Other critics add that this tax fits in with the general vision of the Democrats' tax plans, with Rep. Adrian Smith (R-Neb.) saying it’s a revealing look at party’s overall philosophy.

“Democrats’ proposal to repeal stepped-up basis encapsulates everything wrong with their entire tax agenda,” Smith said. “They have proposed doubling the capital gains rate to nearly 40% in the name of so-called 'fairness,' rather than prioritizing economic growth or even revenue.”

A group of 13 Democrats also opposed the measure, in a rare bipartisan move against the majority agenda.

An April study by The Family Business Estate Tax Coalition revealed that the proposed changes to the inheritance tax would cost more than 80,000 jobs annually and reduce the GDP by $10 million annually for 10 years. The report also pointed out that laborers would share a burden of the cost because it would decrease wages “given that about one-third of the burden of the tax increase is shifted onto labor because the tax-induced reduction in investment makes labor less productive.”

The entire Republican Senate caucus also sent a letter opposing the tax changes.