Never say Republicans can’t learn. After losing the presidency in 1992 on the tax issue, they now use euphemisms for their tax hikes and hide the increases with new and improved fiscal gimmickry. In this Congress, the word “reform” has come to be synonymous with a scheme to extract more money from the private sector, while seeking to avoid paying the electoral price.

This Congress has revived an attack on “loopholes” as evidence of special interest privilege and a fiscal evil that must be destroyed. The House Ways and Means Committee, Washington’s leading hotbed of congressional graft, voted to grab another $19 billion from the private sector through this sneaky means.

The flat taxers similarly denounce all “loopholes,” and propose to eliminate the charitable deduction and the mortgage-interest deduction. Meanwhile, Bill Archer of Texas proposes to close the “loopholes” used by corporate donors to the Democrats (the old tax-and-spend party), but, of course, he invites these corporations to “work with” him on the final bill.

What exactly is a “loophole”? It is an exception to the general rule that income of a certain variety is to be taxed at some level. Let’s say, for example, that all furniture manufacturers are taxed at 20 percent, while the makers of roll-top desks are taxed at only five percent. We have here a “loophole” that roll-top desk makers undoubtedly favor and would like to keep. That, presumably, makes them a special interest.

But exactly who are these desk makers hurting by lobbying to retain their special tax break? Only those who would otherwise benefit from stealing their profits. As for the producers, they are merely gaining a legal right to keep an additional quantity of the profits gained from selling consumers goods they want to buy. What, then, would be the point of denouncing these people as a “special interest” that must be stamped out and then raising their taxes up to 20 percent?

Some economists say the loophole should be repealed on grounds that it distorts market decision making. That is, more people go into roll-top desk making than would be the case without the loophole. But looked at from another view, the relatively low tax on roll-tops is less discouraging to potential producers than the higher tax on other furniture. The solution to this alleged distortion, then, is to lower taxes on all furniture instead of plugging a loophole that applies to one. Why not turn the whole industry into a loophole?

This point is inadmissible in conventional political debate. Politicians devoted to “revenue neutrality” have apparently sworn an oath never to allow government revenue to decline. If they catch someone keeping more money than someone else, they always propose to “upwardly harmonize” the tax rates. This is not only economically destructive; it’s unjust as well.

Let’s say a band of criminals has been raiding your neighborhood, but mysteriously leaving one house untouched. As a result, this house’s residents have their property and their peace of mind. It would be absurd to deal with the crime wave by demanding equal damage to all houses, even if the untouched house had successfully pleaded to be left alone. To crystallize the analogy to tax reform, remember that the ones proposing the rule of equal destruction are the criminals themselves. Destroying more innocent people’s property and peace of mind can only satisfy the envious; indeed, envy and greed are the driving forces behind the movement to close loopholes.

Even worse, the Republican leadership would have us believe that by repealing targeted tax allowances, they are attacking “corporate welfare.” But how can this be? Welfare clients live off other people’s money taken by force. People using tax breaks are merely trying to keep their own money from becoming government property by force. People using tax breaks are the hosts; bums living off others are the parasites. Using the word “welfare” to describe both can only be a deliberate attempt to disguise the real issue. A loophole rescinded constitutes not welfare repealed but a tax raised.

The first signs that tax policy was getting off track came early in this Congress. Washington think-tanks, socialist and free market, joined forces to denounce “corporate welfare.” Repeal that, they said, before you go after conventional welfare. Of course, the purpose of the makeshift coalition was to enhance the prospects of favorable media attention, which it did. But the liberals’ reasons for joining the coalition was to cut industrial subsidies given in the name of defense (good idea) and repeal corporate loopholes (bad idea). Meanwhile, the “freemarket” guys had something else in mind. They were calling for a cut in subsidies to the sugar industry, bee keepers, and the like (good ideas) and work toward a flat tax by repealing certain deductions (bad idea), while quietly distancing themselves from what they knew to be the questionable agenda of the liberals (impossible).

The organizers played down these differences, and the results were predictable. Congress tossed a,side the good parts of both agendas (there’s been no cut in the military or cash subsidies for other industries) and kept the bad parts (repealing tax breaks and deductions wherever possible). The think-tanks have been reluctant to draw attention to this subversion because they are always anxious to take credit for anything Congress passes if it approximates the goal of a pet project. The result—as could have been predicted from the beginning—was that Capitol Hill libertarians gave cover for politicians to do what they like to do most: transfer more money from the private sector to the public sector.

As astonishing as it sounds, the idea of lowering the government’s total tax take from its present level is gone entirely. The lost revenue from targeted tax breaks for children (even that’s still up in the air) will have to be made up through free increases of other fiscal gimmickry (e.g., shifting rates around by changing the way inflation is calculated). It’s hard to remember that in the early 80’s, everyone seemed to agree that taxes needed to be lowered.

What does Capitol Hill want besides higher taxes? It wants to change the technique by which we are taxed. For example, some people want to implement a flat tax you can file on a postcard, erroneously supposing that we would prefer efficient muggings to slow extortions. The Social Security tax is “simple” enough to file on a postage stamp, but how does that improve our lives?

Meanwhile, the postcard method will require that the charitable deduction be repealed at the very time when cuts in the welfare state (which aren’t going to happen) are supposed to be replaced by increased private charitable giving. Yet who can deny that repealing this deduction will lead to less giving? Only Richard Armey, who says it’s his “guess” that we “won’t even miss it.” Is it possible that when an economist becomes a politician he forgets that people make decisions on the margin?

Also repealed will be the mortgage interest deduction, which common sense might suggest would devastate the high-leverage real estate market. But no, says Mr. Armey, since his tax plan—all else being equal—will cause interest rates to fall. His economist hat is back on, but this time doing what economists are worst at: predicting a future that is contingent on 1,000 unknown variables. He’s “confident” that homeowners and the real estate industry will support being taxed more.

If you’re suspicious of these ideas, turn to the idea of “replacing” the current income tax with the national sales tax, a shell game of fantastic proportions. The idea may appeal to people who are not in business. But let’s look at some numbers generated by economist Bruce Bartlett. With no exemptions, it would be 51.9 percent; with food exempted, it would be 37.7 percent; exempt food and medicine, and it would be 49.3 percent. In the end, the national sales taxes would probably have to exceed half of the purchase price of all goods except food. Who doubts that such a tax would cause nationwide economic chaos?

There are other problems. In the transition, savings would be disgorged into consumption to avoid the impending tax. Those who have saved for retirement would be taxed twice. The collection of the tax would be draconian and deadly for rural businesses that have thus far escaped the long reach of the federal government. It’s a wonder that a nonsocialist would even consider such a proposal.

The Republican leadership of the new “revolutionary” Congress has probably concocted other tricks to extract more revenue—to be announced in glowing terms in think-tank press releases. If only the Republican leadership would apply its energies to solving one actual problem in this country: not a lack of federal revenue but the declining incomes of middle-class Americans. A good place to start would be to reduce the tax take of the federal government. This Congress made a contract with America; unless taxes are reduced, America should put a contract out on the Congress.