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Pet Care Deduction: Government Micromanagement, Tax Code Complexity, and Bad Incentives

3 min readBy: Joseph Bishop-Henchman

The Atlantic City Press on the proposed deduction for pet expenses:

With 62 percent of American homes owning a pet, that bill could cost a lot of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. money at a time when the federal government can least afford it.[…]

The Tax Foundation, a Washington-based nonprofit, raises several other good points about this bill: First “qualified pet expenses” includes such a wide variety of undefined things that it could allow people to deduct the cost of new toys and grooming sessions. Even if the deduction is narrowed, the foundation says, it will mean more tax-code complexity.

But the biggest problem is this: The federal debt is mounting. People are worried about the cost of health care for humans and whether it will explode the national deficit. This is not the time to lose more revenue. Nor should the federal government be encouraging pet ownership – which is precisely what a tax break does. Fact is, if you can’t afford a pet, don’t get one.

There’s a better way to ameliorate the problem than a sweeping new tax break. The Community FoodBank of New Jersey accepts donations of pet food. The food bank understands that the same people who need help feeding their families also need help feeding pets.

A good idea, and certainly more constructive than harassing our Bill Ahern for speaking the truth in Parade. For a refresher, here are some of our reasons why this deduction is bad policy:

  • “Everyone else is getting favors so I should get some” is at the core of all bad fiscal policies.
  • People shouldn’t get pets just because the tax code encourages them to do so. In fact, such people would probably be the worst pet owners. I’d hate to see loving pet owners become dependent on the government for their pet care.
  • Politicians should use the tax code to raise revenue, not to shape people’s behavior in ways they think is nice. If you want to cut taxes, cut taxes. But this type of targeted tax break is precisely the thing that mucks up the tax code and adds complexity and uncertainty. (Check out the mocked-up Individual Pet Tax Return (Form W-K9) for some insight as to why.)
  • I don’t want the IRS spending its time scrutinizing whether that my purchase of a new can of Fancy Feast or new chew toy or new fish tank castle “qualifies” for the deduction, as MSN noted. The deduction will end up being so broad it bankrupts the government or (more likely) so narrow that it will be useless.
  • A federal government program for pet expenses would never fly, yet this bill would achieve the same thing via a less-scrutinized tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. .
  • The deduction for children was wildly abused before the IRS required Social Security numbers for each dependent; the year after it was required, 7 million children “disappeared.” Preventing fraud in declaring pets would be extremely difficult to administer.
  • Kathy at Blogging For Michigan also noted that people can deduct expenses for their own medical care only if those costs exceed 7.5% of adjusted gross income, so the bill would give your pet’s medical bills better tax treatment than your own.