I like paying attention to language. And as well as things are going for us in this election cycle, I think we are surrendering the term "loophole" without a fight -- and without even noticing. I hear the mortgage interest deduction being referred to (most recently by Paul Ryan talking with Chris Wallace) as a "loophole", and it most certainly is not. We need to reclaim the term "loophole" together with its connotation of cheating, of cutting corners, of escaping the intent of a rule, regulation, or law. The use of "loophole" should be understood as equivalent to "Yeah, he was guilty, but got off on a technicality." It's all about framing.
Compare these two sentences:
1) "Mitt and Ann Romney took advantage of a loophole in the business investment tax code to write off $70,000 in expenses for her dancing horse."
2) "Herb and Dorothy Smith used the mortgage interest loophole to reduce their taxable income by $23,000, itemized on the Schedule A."
Herb and Dorothy are availing themselves of a decades-old policy to encourage home ownership. Mitt and Ann are availing themselves of expensive tax advisors -- and found a loophole.
More below ...
From an online dictionary (our interest is in sense 3):
loop·hole: noun
1. a small or narrow opening, as in a wall, for looking through, for admitting light and air, or, particularly in a fortification, for the discharge of missiles against an enemy outside.
2. an opening or aperture.
3. a means of escape or evasion; a means or opportunity of evading a rule, law, etc.: "There are a number of loopholes in the tax laws whereby corporations can save money."
Note that Herb and Dorothy's use of the mortgage interest deduction does not qualify. They are not escaping or evading, they are encouraged by policy to buy a house, and as compensation, as an incentive, they are allowed to deduct their interest payments. Nothing shady here.
I won't analyze the fancy footwork around the dancing horse deduction. We should assume that Mitt and Ann looked hard for every possible extra credit deferred re-investment carryover subsidized depreciated amortized break they could claim.
And we need the word "loophole" and the sense of impropriety it implies, to describe their sort of too-clever, too-aggressive behavior when we find it. (And not to pick on Mitt and Ann only -- we should denounce loophole evasions and escapes wherever we find them.) But Mitt's returns could serve as the text for a master class in shaving the tax laws. And that's why we won't see them. We all paid for that dancing horse -- and who knows what else?
That is all ... except for citing as a reference this RSA animation of geographer David Harvey on the Crises of Capitalism. Beginning at about the 2:45 mark he makes the point that the mortgage interest deduction was instituted in the 1930s in recognition that "debt encumbered home owners don't go on strike."