After a Republican senator suggested that people who own alpacas only keep the animals as a way to dodge taxes, the Alpaca Owners Association spoke up for its members and their businesses.
Sen. Jeff Flake (R-AZ) probably doesn’t own an alpaca, but he’s certainly learning a whole lot about them this week.
Last week, the senator released a report titled “Tax Rackets: Outlandish Loopholes to Lower Tax Liabilities” to “highlight loopholes that create fake markets for unnecessary or unwanted goods and services.” Among them: alpacas.
In a tongue-in-cheek video that mimics heart-wrenching animal shelter advertisements, Flake urges viewers to “be the answer” for alpacas kept as tax shelters. “Every tax day, alpacas are abused,” he says in a voice-over. “One by one, they are written off.”
Flake showed up on Fox and Friends last week, arguing (while struggling to keep a straight face) that alpaca ownership has become more common because “the IRS has given a tax advantage to people who own alpacas.”
“He Misused the Facts”
The Alpaca Owners Association was not amused and said the report spreads misinformation about why people keep the animals.
“Sen. Flake’s accusations of the abuse of alpacas is disingenuous,” said Bud Synhorst, the group’s executive director, in a news release. “I am stunned that the senator would go on national television without all of the facts about the North American alpaca industry!”
He noted that the industry is relatively new but has grown consistently over the past 30 years because of the market for their wool. The Section 179 deductions cited by Flake apply to any equipment purchased for business reasons, including all types of livestock, Synhorst said.
“Sen. Flake was unprepared to talk about the tax code as it relates to the alpaca industry. He misused the facts by stating that alpacas were singled out,” he said in the news release, adding that alpacas “are treated like any other livestock including cattle, hogs, and sheep.”
Shifting the Conversation
Flake conceded that there are likely legitimate alpaca ranchers but argued that more detailed information should be gathered on tax exemptions used by businesses.
The Washington Post noted that the industry has long had its critics but that it represents small potatoes from a tax standpoint. Official counts of the commercial alpaca herd vary between 141,000 and 250,000, according to the newspaper.
Richard Sexton, an agricultural economist at the University of California at Davis who coauthored a study questioning the alpaca herd’s commercial viability, nonetheless noted that the value of the industry was $32.6 million in 2012—meaning that any tax benefits to be gained from the animals would probably not top $10 million annually. He argued that the IRS probably shouldn’t regulate the kinds of livestock people buy.
“Then you’ve got the government effectively stepping in and trying to say what investments are legitimate,” Sexton told the Post.