>> A loophole is a narrowly targeted tax break, not a broadly applied lowered rate
"Loophole" has taken on a new meaning in the last few years (largely as a result of misuse), but the term really describes something quite different.
The term actually referred to a mistake, or a hole in the tax code, that was unintended by Congress. Or sometimes, just an ambiguous provision that hadn't been settled in the courts yet.
I believe the new reference to "tax breaks" is very recent. I don't recall the widespread misuse of this term until the last few years, although it could be wrong.
For example, we are referring to deductions provided to certain industries (oil) for specific reasons (to encourage development) as "loopholes"; in fact, these were well thought out and researched ideas that Congress specifically provided for.
OTOH, Congress never intended for stockholders to be able to use "Wash Sales" of securities to manipulate the year in which income falls. So, when some bright people realized they could do this, the Wash Sale Rules were created to stop it. Similarly, the original "At-Risk" rules were created to limit the deductions (principally by limited partnerships) of losses for which the debt was nonrecourse with respect to the taxpayer -- something Congress didn't originally think of. These are characteristic "loopholes".
Politicians have a strong tendency to redefine terms to fit their needs of the moment (thus, government spending became "investment" in the '92 campaign). Recently, I heard conservative ideologue, no-spin-zone, Bill O'Reilly use the term "revenue enhancement" meaning "taxes", so over time, it seems the desired effect is had -- a softening of the vernacular. |
