It’s not a loophole just because Democrats don’t like it

While last week released the ridiculous Inflation Reduction Act on CNN, Senator Joe Manchin said the Democrats were simply trying to “close the loopholes and collect taxes owed to the US Treasury and people.”

In Washington, “loophole” is a euphemism for a perfectly legal policy that Democrats have decided they want to regulate or tax. The word “loophole” suggests that some ambiguous words or omissions in the text of a bill have allowed people to exploit the law. Few Democratic “loopholes” meet this definition. In fact, in most cases, the “loopholes” they are talking about were deliberately written to exist in their current form.

Take the “interest-led loophole,” which intentionally functions in the tax code as a means of incentivising investment, risk, and “sweat equity”: ownership shares generated through work rather than just capital investment.

Manchin, DW.Va., may be looking for ways to increase “revenue” so he can tell voters that his account won’t add to the deficit. And those who join the populist zero-sum economy may want to punish private equity and redistribute wealth (although the American Investment Council says more than 74% of private equity investments went to small businesses in 2021).

In any case, no matter what Manchin says, none of the new taxes found in the reconciliation bill are now “due to the Treasury and the people of the United States”.

This also applies to the minimum corporation tax of 15%. First of all, it needs to be repeated that corporate taxes are passed on to consumers or employees. Furthermore, manufacturing companies that spend a lot on upfront capital investments – not politicians’ favorite “investment” euphemisms when they talk about subsidies, but the real type – are the ones that will eventually get hurt. (The Tax Foundation says this tax will kill 27,000 jobs.)

The Manchin-backed bill will also restore the long-overdue and failed superfund tax on crude and imported oil, which will also be added to energy bills. It is unclear what “loophole” Manchin is claiming the superfund tax is closing.

That said, the “loophole” farce is not new. It has been used most effectively in attacking gun rights, which, let’s face it, the left sees as a loophole in the Constitution.

There is no “gun show loophole,” as the law was written so that only commercial, and not private, transfers required federal background checks. If the Senate rejects your efforts to comply with your favorite background check policies, as it did in 2013, it’s not a “loophole”, it’s just “the law.”

There is no “Charleston loophole”, since the killer did not exploit existing law, rather he took advantage of a data entry error. The three-day waiting period for background checks was negotiated and then intentionally converted into law that way at the time of the switch.

And there is not even a “loophole for the possession of weapons by the list on the fly”. There are the second, fourth, fifth and sixth amendments to the Constitution.

Framing these debates as a struggle between those who advocate closing the “loopholes” and those who want to keep them, as the media always do, is a way to bypass the debate and support politics. It is intentional.

After all, the word “loophole” strongly insinuates an unfair policy. Journalists would not call laws that legalize abortion up to the ninth month of pregnancy, as many do now, a “viable child termination loophole” simply because Republicans claim it is.

Now, it is the prerogative of a senator to vote for a bill that pumps hundreds of billions more into a rapidly rising inflation economy or raises taxes on consumers, energy producers and producers during a recession. What he is not doing, however, is closing the “loopholes”.

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