Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit

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Last week, Assistant Secretary for Tax Policy nominee Lily Batchelder floated the latest in the Biden Administration’s efforts to provide tax relief to the nation’s millions of people suffering due to the pandemic: a $250 refundable tax credit for families with children under the age of 18 who have pets in their household.

President Biden with his dog, Major
Photo by Stephanie Gomez/Delaware Humane Association, via NY Times/Associated Press
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In speaking at the Tax Policy Center webinar entitled “Thinking Outside the Box Tax Policy Ideas”, Batchelder cited the overwhelming research showing that the presence of certain family pets has a strong correlation with positive outcomes in children, including health, education and lifetime earnings. (See, for example this recent research study by Robert Matchock, Pet Ownership and Physical Health)

Insisting that the Biden Administration will continue its evidence based approach to good governance, current Assistant Secretary Mark Mazur noted that evidence has tied positive outcomes to only certain pets-namely dogs and cats. As such, the Treasury officials expected that the legislative language they would support would not extend to other household friends. Mazur acknowledged that the research to date has not studied other animals nearly as much as dogs and cats although there is preliminary research showing that larger rodents (such as chinchillas) have had a positive impact on mental health across age ranges.

Facing questions about whether this might be expanded to older Americans, as the data strongly correlates pet ownership with positive health outcomes among seniors, Mazur was noncommittal, though he emphasized that the Administration’s focus in the near term was on improving conditions for families with children.

“It might be the camel’s nose in the tent,” said Mazur, “but for now we are tying this to our proposals to make permanent the expanded child tax credit that Congress enacted last month.”

Needless to say the proposal generated quite a stir in the webinar. Former NTA and current Executive Director of the Center for Taxpayer Rights Nina Olson asked if Treasury expected IRS to expand its nonfiler portal to allow nonfiling taxpayers to enter pet information alongside their children. Commissioner Rettig, also on the panel, in noting that he is the first Commissioner in IRS history to own not one but two adopted retired Greyhound racers, suggested that Congress should allocate an additional $100 million to its proposed upgrade of technology in order to allow it to build the pet database. 

Panelist and Tax Notes’ tax historian Joseph Thorndike noted that many of these pets may be the direct descendants of pets removed from being claimed as dependents in 1986 when Congress began requiring taxpayers to list the social security number of dependents which caused almost seven million dependents to disappear in one year.  He noted that the ancestors of today’s household pets would no doubt be smiling down as pets once again returned to the 1040.

While not on the panel, former Treasury Secretary Larry Summers, who was slated to speak on a separate panel with former Commissioner Rossotti about the Rossotti/Sarin/Summers tax gap proposal, interrupted Batchelder, stating that the “last thing poor people need is more money in their pockets. I worry about the inflationary impact in the important pet sector.”

As with any proposed credit expansion, there are lots of ancillary issues. PT’s own Keith Fogg notes that “in the 1860s in the predecessor to Section 6334 Congress allowed as part of the property exempt from levy one cow, three pigs, five sheep and the wool thereon. Although that was changed to livestock in 1954 it’s good to see animals formally entering the code again.”

Click here for a link to a video of the webinar.

About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. LOL! And Happy April 1st to you, too! What do you want to bet that some Congressperson will read this and take it seriously either to (a) endorse it or (b) use it as an example of tax legislation gone wrong!

  2. Lavar Taylor says

    When I first started reading this, I thought that this post was just another of your excellent April Fool’s Day posts. But then I read the quote from Larry Summers and knew that this had to be true!

  3. Harry-Todd Astrov says

    This is great!!! I can picture certain opinion shows going into “wartime” coverage and barking out loud in opposition to this. The best satire has a patina of truth to it; this “proposal”has that in abundance.

  4. But what about the claw-back provisions?

  5. KRISTINA LEITZ says

    Well, what about those people that don’t have kids but do have pets…BTW, $250 is nothing when it comes towhat you spend on pets.

  6. I want to know why goats are not included in this discussion. And back in the 1800s, if the wool from sheep was exempted from levy, why not the fiber from goats? Goats are good! N

  7. “We have to put a paws on this political dogfight,” the Biden administration said. “This is not the tax tail wagging the dog, but rather an effort to collar the issue of poverty in this country.”

    Republican opponents shot back. “We will neuter this bill in committee,” one source was quoted as saying.

  8. Susan Morse says

    Leslie Book with the April 1 WIN!! Made my day.

  9. Bob Kamman says

    Normal body temperature for dogs and cats is 101.0 to 102.5°F. Obviously, this adds to global heating. Snakes, on the other hand, are room temperature. The credit should be an incentive to give up cats and dogs, and favor snakes.

  10. Lavar Taylor says

    With only dogs and cats qualifying, you could say it is reigning cats and dogs.

  11. James Creech says

    This is great. Although expanding it to a refundable credit to prospective pet owners might encourage a few adoptions. As well all know pets are wonderful for mental health #aprilfools

  12. Mike Desmond says

    The comment thread suggest that the definition of “qualifying pet” will become a major guidance headache for Treasury and Counsel.

  13. Norman Diamond says

    Thomas doesn’t seem to be working at the moment so here’s an archive of HR 3501:
    https://web.archive.org/web/20131208105216/http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3501.IH:

    Then there’s the early April Fool prank that Tax Court played on everyone who had Tax Court files bookmarked. Look at what this bookmark does now:
    https://www.ustaxcourt.gov/InOpHistoric/VanDusen.TC.WPD.pdf
    Leagle has it though:
    https://www.leagle.com/decision/intco20110602a75

    And one which Congress didn’t intend as an April Fool but courts have made it into one:
    https://www.law.cornell.edu/uscode/text/26/7803
    subsection (a)(3)(C)

  14. Kenneth H. Ryesky says

    For various reasons that pertain to a rare if not unique set of circumstances, Appa, a pure-bred mutt, is now shared between my son’s household and a neighbor’s family; all, including and especially Appa, benefit from the arrangement. Which family gets to claim Appa as a qualifying pet? What kind of paperwork would be necessary to properly claim Appa as a qualifying pet? And what happens in the unlikely event that one of the couples gets divorced?

  15. I knew I was setting myself up by going to see what the “webinar” YouTube link must be but seriously well played! I expected more of a generic “April Fools!” clip but that was so much more special. Again, well played!

    If you did not read the article to the end and go watch the video of the webinar YouTube link, you have missed out.

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