Raccoons are extremely likely to have rabies. The incubation period is typically 2-3 months, but it can be up to 2 years for Raccoons in rare cases.

So if you take in wild raccoons they can seem perfectly healthy, but can turn on you surprisingly fast and with little warning. So it is something you need to be aware of when you are around them.

It isn't true for all animals though. For example Opossums they are very resistant to rabies because of their low metabolism. The virus that causes rabies has a very hard time growing in them. They can get the disease from a infection, but it is very rare.

Also cutting-off-the-head to check for rabies is something they do for any animal that bites a human. Squirrel, bat, cat, dog, etc. That is normal procedure.

None of that is really a issue here.

The problem is that this was a case of blind and violent bureaucracy failing to use judgement and treat other people like humans. They have rules, they apply the rules sans judgement, and are quite proud of themselves for doing it.

Any sort of "Zero tolerance" approach to government results in this sort of brutish unfeeling illogical behavior. At that point the people in charge are less human and more android. They are just acting as automatons carrying out hard coded instructions without feeling, remorse, or reason.

Keeping squirrels as pets are actually pretty common. It isn't a "exotic" pet in the same way that a tiger or cobra is. It wasn't a threat to anybody.

The destruction of the man's home and family is just a result of a busybody neighbor complaining to a unfeeling unthinking state bureaucracy.