Regulation

One Man's Loophole Is Another Man's Liberty

Big government tightens its grip on "loopholes." Beware.

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The owners of Eden Try, a 12-acre estate in Spotsylvania County, Virginia, host the occasional wedding. Local officials feel strongly that This Must Be Stopped.

To that end, the Spotsylvania Board of Supervisors has voted unanimously to impose a cap on the number of temporary event permits the county can issue to any one venue: no more than six per year. If Eden Try or anybody else wants more, they will have to ask the supervisors personally.

As the Fredericksburg Free Lance-Star reported, "Spotsylvania previously had no limit on the temporary permits, which allow activities such as weddings, bazaars, small fairs and fireworks displays." But someone expressed "safety concerns," such as "the potential for wedding attendees to drive drunk."

The potential. Do any data support the concerns about the potential — DUI arrests, for instance? Apparently not. Nor, even if there were such data, is it clear how allowing up to six events would mitigate the concern. If safety is an issue, it would seem to be an issue no matter how few events are held. So while the new policy will incommode Eden Try, it will not solve any problems.

As the Fredericksburg paper continues, "Supervisor David Ross, who pushed for the new policy, said the previous policy was a way around special-use permits, which require public hearings and board approval. The county needed to close that loophole, 'especially when neighbors are impacted in the form of noise, traffic, safety, etc.'"
Ah, yes — the dreaded loophole. Loopholes are something up with which those who favor big government will not put.

There is, for instance, the misnamed "gun-show loophole." Why is it misnamed? Because federally licensed firearms dealers must perform a background check to sell a gun no matter what the point of sale. If a dealer sells a gun at a gun show, then he has to run a background check. The "loophole," such as it is, is not specific to gun shows. It refers to the fact that one private individual can sell a firearm to another private individual without performing such a check. Your Uncle Fred can sell you his old six-shooter, or you can buy a Glock from a guy through the classified ads, and no background check need take place.

Does this mean potentially dangerous people have another way to get guns without alerting the authorities? Sure — just as the Fourth Amendment gives them a "loophole" to avoid being searched by the police at whim. It also means millions of law-abiding gun owners can buy and sell their private property without creating a record in a government database.

Requiring a check for every gun transfer is a half-skip away from creating a national gun registry.

To gun-rights advocates, letting private citizens trade private property is an exercise in liberty. To the San Francisco Chronicle and countless others, it is "a long-standing loophole in federal law."

So, apparently, is the First Amendment. Prior to the Supreme Court's ruling in Citizens United, the Bipartisan Campaign Reform Act would not permit incorporated groups of people to engage in "express advocacy" for or against a candidate within a month of a primary or two months of an election.

The nonprofit group Citizens United wanted to distribute a movie critical of Hillary Clinton. During oral arguments, the U.S. solicitor general conceded that what applied to movies applied as well to books: Under campaign-finance laws, books about politicians could be banned.

A five-justice majority rightfully recoiled from such a proposition. Their decision horrified progressives — whose views were summed up by The New York Times, which wailed that allowing people to speak freely about politicians created "an enormous loophole in the law." The Times did not mention, nor did it object to the fact, that the law in question already contained an express loophole for newspapers and other media companies.

In the Times' august view, allowing other corporations the same freedom it enjoys amounts to a "loophole."

Then there's the carried-interest loophole, which President Obama would love to close. When venture capitalists and other investors back a startup, part of the reward for risking their money is a share of the startup's profits — if any. That share is called the "carried interest," and it is taxed as capital gains, rather than as ordinary income. This helps encourage investment in the same way that the home mortgage interest deduction encourages home ownership and the higher-education tax credit encourages college attendance.

You can call low tax rates, exemptions, and tax credits loopholes — and the tax code is full of them. But calling them loopholes implies that the government, not the taxpayer, really has the rightful claim to that money, so keeping it — even through a policy the government itself created — amounts to pulling a fast one: You're not keeping more of the money you've earned, you're holding back money you ought to be paying. This isn't quite the same as suggesting all wealth belongs to the government. But it's getting close.

The prevalence of complaints about loopholes is telling. It betrays a mindset. It is the mindset that believes government ought to regulate pretty much everything: Where the law is silent, lawmakers have made a mistake, for that which is not expressly permitted should be forbidden, and that which is not expressly confiscated probably should be.

Needless to say, this is the exact opposite of the ethos of the Founders, for whom everything not expressly forbidden was allowed. But then they lived in simpler time — when society was not threatened by menaces such as wedding receptions, and books, and rich people. We are so much wiser today.