Changing the Animal Legal Paradigm using the United States Tax Code

• Author: Joanne M. Pyc
• Pages: 947-972

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I Introduction

There has been an increased interest in the sufficiency of the law relative to non-human animals in recent years.¹ Steven Wise's book, published in 2000, arguing for limited legal rights for chimpanzees, was based firmly on legal precedent.² In addition, there has been activity in thePage 948 areas of tort, family, contract, and probate law in the direction of increased protection for the needs of animals.³ Many states have upgraded their anti-cruelty laws in regard to animals in recent years,⁴ there has been an attempt in the federal courts to obtain standing for non-human animals in order that their rights may be protected in a court of law,⁵ and multiple suggestionsPage 949 have been put forth for amending the Animal Welfare Act to grant greater protection to non-human animals.⁶

All of this activity signals a philosophical and cultural change that is brewing regarding the property status of animals. In time, it may be that non-human animals will no longer be legally classified as property, and will instead have a status more similar to that of children today under the law.

This Comment will focus on the power of the United States Internal Revenue Code (hereinafter "IRC") to advance the position of non-human animals from their current status as personal property to a status that more accurately reflects the reality of their existence as beings that are entitled to some rights under law. Section II of the Comment will discuss the history of the tax code as a tool to achieve social objectives and the current use of the IRC today for the same purpose. Section III delves into the changes occurring in animal law today and what is forecasted. Section IV analyzes how the tax code can be used to further the changes in animal law through a system of tax incentives and disincentives, applied to both individuals and businesses at the federal level. As will be explained, a federal program would impose a level of consistency on the animal issue that is missing when individual states implement their own initiatives.

II The Power of the Tax Code in the United States to Advance Social Objectives

A History of the U.S. Tax Code

Congress' power to tax arises from the United States Constitution.⁷ Article I, ß 8 of the Constitution states that "Congress shall have power to lay and collect Taxes, Duties, Imposts and Excises, to the Debts and provide for the common Defence [sic] and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States."⁸

The IRC was implemented at the start of the 20th century.⁹ One of the first issues that faced the United States Supreme Court was whether Congress was limited to taxing and spending only to carry out the powers enumerated in Article I, or if the power to tax and spend was more broad,Page 950 enabling Congress to provide for the general welfare.¹⁰ The Court found that the power of Congress to tax and spend was more general.¹¹

In United States v. Butler, Congress attempted to stabilize agricultural production by offering subsidies to farmers.¹² It sought to restrict the supply of agricultural product in order to raise the price of that product.¹³ Although the act at issue was declared unconstitutional, the principle that Congress' power to tax is broad enough to provide for the general welfare has been upheld, and is still good law today.¹⁴

The Court also addressed a judicial distinction that arose between taxes that were regulatory and those that generate revenue.¹⁵ During the 1920s and 1930s, the Court held that taxes that imposed a penalty were not constitutional.¹⁶ However, this distinction between revenue raising taxes and regulatory taxes was short-lived.¹⁷ In 1937, the Court upheld a tax on firearm dealers, stating that every tax was in some way regulatory.¹⁸ It is accepted today that taxes can be both regulatory and revenue-generating at the same time.¹⁹

In the years following World War II, taxing became accepted as a tool of domestic policymaking.²⁰ During the 1950s and 1960s, congressional policymakers were able to target tax reductions to specific groups or interests with the goal of promoting social and economic policies.²¹ In fact, the services provided by the federal government are sometimes referred to as "public goods."²² The price systems used to obtain these public goods are taxes.²³ Legislators constantly balance the need for public goods against the cost of providing those public goods.²⁴

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B The Use of Tax Incentives and Disincentives Today

The IRC can be used in two ways: to encourage behavior and to discourage it.²⁵ Ways to encourage behavior include exemptions from taxes, tax deductions, and tax credits.²⁶ Ways to discourage behavior include the imposition of taxes and the denial of deductions, exemptions, and credits.²⁷

One way to encourage behavior through the IRC is the use of blanket exemptions from paying any federal taxes whatsoever. Charitable organizations²⁸ are an example. The government sees value in their existence because their purpose is to better the lives of citizens. The exemption from the federal income tax allows these groups to spend more of their assets on their missions rather than having to funnel assets to the government in the form of taxes.

Congress also uses tax credits as incentives to promote socially desirable activity. Examples include the credits for energy efficiency such as producing fuel from a non-conventional source,²⁹ qualified electric vehicles,³⁰ and alcohol used as fuel.³¹ Congress desires that cheap and efficient energy be available to citizens. In addition, it values a clean and healthy natural environment for its citizens.³² Thus, in order to encourage this behavior, Congress allows these deductions.³³

In addition to the credits for the promotion of energy efficiency, Congress gives other tax credits. One of these is the credit for expenses incurred for providing access to disabled individuals as required by the Americans with Disabilities Act.³⁴ A tax credit is also given for the employment of Native Americans, who currently have a higher rate of unemployment than average.³⁵ Moreover, credits are given for interest on home mortgages to encourage home ownership.³⁶ Finally, a tax credit is given for reforesting timber, which is in alignment with concerns for the health of both the environment and the timber industry.³⁷

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Finally Congress encourages behavior by way of provisions for itemized deductions, which further specific social policies. Some examples include the allowance for the amortization of pollution control facilities,³⁸ the deduction for charitable contributions and gifts,³⁹ the deductions allowed for soil and water conservation expenditures,⁴⁰ and the deduction for clean-fuel vehicles.⁴¹ There is no law that mandates saving energy, yet saving energy is rewarded by the IRC;⁴² there is no law mandating home ownership, yet home ownership is rewarded by tax code;⁴³ and there is no law mandating giving to charity, yet giving to charity is encouraged by the tax code.⁴⁴

On the other side of the equation, Congress uses tax disincentives, such as the denial of deductions, to discourage some behavior. For example, the IRC discourages criminal behavior. Examples include the denial of deductions for expenditures in connection with the illegal sale of drugs,⁴⁵ acquisitions made to evade or avoid income tax,⁴⁶ and personal service corporations formed or availed of to avoid or evade income tax.⁴⁷

There is case law supporting the use of the IRC to further social policy.⁴⁸ Bob Jones University is a private school that was discriminatory in its admission policies.⁴⁹ The university claimed tax-exempt status as a charitable organization under ß 501(c)(3) of the code.⁵⁰ The IRS denied the university its tax-exempt status based on its discriminatory practices.⁵¹ The United States Supreme Court upheld the IRS, finding that the denial of tax-exempt status to private schools that racially discriminate did not violate the free exercise of religion clause of the Constitution.⁵²

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C Attaining Social Objectives Using the Tax Code and Other Fiscal Measures

Use of the IRC to attain social objectives continues to be proposed today. For example, feminist writers have argued that tax policy has a significant impact on the lives of women.⁵³ Edward McCaffery argues that such factors as the aggregation of spousal income tax rates, the disaggregation of spousal social security benefits, the failure to tax income from self-supplied labor, and the treatment of mixed personal-business expenses such as child care and fringe benefits all influence familial labor decisions to the detriment of women.⁵⁴ McCaffery discusses changes in these tax initiatives that would benefit the status of women in the labor market.⁵⁵ Anne Alstott argues that the creation of family allowances and the expansion of dependent credits would both facilitate women's market work and assist some caregivers.⁵⁶ Whatever the particulars of their plans, these writers argue for changes in the IRC which they believe will improve the lives of women through a system of economic incentives and disincentives.⁵⁷

Other writers advocate use of the tax code to assist in rehabilitating the...