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Senator Flake Releases “Tax Rackets” Oversight Report

By Adam Kazda | April 10, 2017

Last week, leading government waste watchdog, Senator Jeff Flake (R-AZ) released his new report, Tax Rackets: Outlandish Loopholes to Lower Tax Liabilities. The report sheds light on tax expenditures and how they are “being exploited to both dodge taxes and subsidize questionable projects and activities.”

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Perhaps the most egregious example of waste within Senator Flake’s tax report is the ‘Alpaca Tax Fleece.’ According to the report, “The price of purchasing livestock, including furbearing animals, can be deducted as business costs.” This, of course, includes Alpacas, and have valuable tax benefits due to their high price tag ($4,000 or more). Originally Alpacas were raised for their wool, but since a large market never emerged in the U.S., the industry now “tends to stress the tax advantages of raising alpacas.” Kevin Gellatly, an Australian shearing expert says, “we do get a lot of rich clients getting into them to dodge tax. For example, if they’re selling a company and are going to get hit with a huge tax bill, they’ll go and buy 10 alpacas which helps circumvent that bill.”

Whatsmore, Alpaca associations are promoting the tax write-off. In fact, “when the Alpaca Breeders Association asked its members to rate on a scale of 1 to 10 what motivated them to get into alpacas, more than half gave the tax benefits a 10.”

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Tax Rackets also reports on the ability for gamblers to deduct gambling losses and the cost of gambling trips. According to the report, casual gamblers can deduct every dollar up to the amount of winnings they earned. So, if you won $1,000, you could deduct $1,000 in losses. In addition, “professional gamblers” can deduct losses greater than their winnings and travel expenses to reach a casino, racetrack, or other gambling establishment. Further, those gamblers can deduct meals, entertainment, and other “business expenses” as “incurred as part of their job.” The report notes, “approximately 874,000 tax filers claimed $18.8 billion in deductions for gambling losses in tax year (filing year 2015).”

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Finally, if you thought the previous tax expenditures were outrageous, there is a tax credit for the production of poultry poop power! According to the report, energy produced from poultry manure is eligible for federal tax credits. Tax credits for these “open-loop biomass” sources can total up to $200 million every year.

Senator Flake’s report identifies loopholes in the tax code that could cost up to $50 billion over the next decade. “Scrubbing the tax code for other unfair tax expenditures would identify many more loopholes costing hundreds of billions of dollars that could be closed with the savings more evenly distributed. The result would be reduced tax bills for most American families and small businesses, greater prosperity and opportunity for all, and a simpler, flatter and fairer tax code that is far less susceptible to manipulations and rackets.”

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Read the full report here!

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