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Arizona Sen. Jeff Flake would like to shear tax loopholes on alpacas, gamblers

PHOENIX — He may be serious about rooting out over-the-top tax loopholes, but U.S. Sen Jeff Flake knows how to have a little fun while delivering his message.

For the seventh time in three years, Flake (R-Ariz.) has released his report on “outlandish loopholes” that he said could cost as much as $50 billion over the next decade.

Flake’s report came out Wednesday but a tongue-in-cheek video summarizing “Tax Rackets” was posted online last week.

Here’s some of what caught the junior senator’s attention this time:

• Alpaca tax fleece – With no significant market for alpaca wool in the United States, these pet-like animals are being advertised and sold as walking tax shelters. Owners are able to deduct the cost of the alpacas, and because they are low maintenance and require little space, the animals are also ideal for claiming a home with a small backyard as a farm.

Some anecdotal examples of the alpaca tax fleece highlighted in the report include step-by-step tax deduction guides from alpaca associations, reports of individuals buying alpacas for tax breaks while still “boarding” the animals with the sellers, and one individual who zeroed out her taxable income by purchasing and deducting $300,000 worth of “college fund alpacas” which, in turn, allowed her children to collect $680,000 in grant money to attend top-tier universities.

• Lucky loophole – Not only can “professional gamblers” deduct gambling losses, they can also deduct the cost of gambling trips as businesses expenses incurred as part of their job. This allows them to deduct the cost of travel to a casino or racetrack, meals, entertainment, fees for race handicapping information, and “other expenses associated with the activity of gambling.”

Generous deductions for gambling losses have also created a black market for losing lottery tickets, which are bundled in the hundreds and even thousands, and sold online under such headers as “Tax Write Off” and “TAX REFUND TIME!!!” The Congressional Research Service estimates that the loss in tax revenue resulting from the gambling loss write-off could be more than $2.8 billion annually.

In January, Flake put out “Porkemon Go,” a yearly report on peculiar projects the government funds.

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