Do Tax Incentives for Farmland Leases Increase Farm Supply? Evidence From Iowa's Beginning Farmer Tax Credit

In recent decades, agriculture has become increasingly concentrated through horizontal mergers and acquisitions via corporate entities, and policy makers are concerned this will be exacerbated by the aging population of farm operators. To reduce market concentration in agriculture, many states have enacted policies to entice new prospective entrepreneurs into farming. Among these are tax credits for existing farm owners who lease or sell farmland to “beginning farmers.” These subsidies aim to compensate the lessor for the additional risk associated with leasing land to a new farming enterprise. This paper investigates the effect of Iowa's Beginning Farmer Tax Credit program on land leased to farmers, farm operators' average age, and various metrics of non-corporate farm operations. Our point estimates suggest very small effects of the program on Iowa's prevailing farm trajectories with a budgetary cost of more than $100,000 per added independent farm.