Loopholes

It seems like all the presidential candidates are getting on the bandwagon.  No matter what program we want to fund or just to reduce the deficit, all we have to do is close the tax loopholes.  While this seems like a popular idea, maybe we should think about it for just a minute.

Some loopholes are undoubtedly created as political favors.  I'll contribute $1M to your campaign if you give my product some kind of tax advantage.  Generally, I would be happy to see these loopholes disappear up.  I think the electoral process would be better for it.  On the other hand, many (most?) loopholes are established to encourage a particular behavior.  The most common one is the home mortgage tax deduction, which encourages home ownership.  Can we expect to eliminate all the loopholes and not expect the behavior of the entities benefiting from the loopholes to change?  Will their behavior change in a direction that is more costly to the economy in general and the middle class in particular?  I don't think anyone knows, but before we go around cavalierly hacking away at loopholes, we damn sure better understand the consequences.

You just can't expect to take money from one segment of the population and give it to another without expecting those that lose their money to change their behavior as a result.