While individual loopholes and tax expenditures cost the government great sums and enrich the 1% (more like the .01%), what really sets oligarchy's hearts aflutter, and really enriches tax planners, is the interaction of these provisions of the law. Let me take a relatively simple example, the interaction of the charity deduction and the special treatment of capital-gains.
Let's say that the Smith Corporation and the Jones Corporation are locked in a lawsuit over patent rights. Whoever wins will be greatly enriched, and the judgment will come down in 2013. In 2012, I buy $1 million worth of each stock. In January of 2013, I commit to giving Harvard securities of $1 million value at the time of my gift. (That phrasing is almost standard in the gifts from the very rich.) In return, Harvard names a building after me.
Smith Corporation wins the lawsuit. Its stock rises 50% in value, and Jones Corporation falls to 50% of its old value. My $2 million purchase is now $ 1.5 million in Smith Corp. stock and $ 0.5 million in Jones Corp. stock. I give Harvard, as I have promised, the Jones Corp. stock. I sell the Smith Corp. stock and settle down to pay my taxes.
My capital gains on Smith Corp. stock are $500,000. On that, I owe 15%, or 75,000. My gift is valued at $1,000,0000, and in consideration of that gift, I deduct $1,000,0000 from my income that is taxed at 35%, or pay $350,0000 less in taxes.
All told, from those transactions:
Harvard gains $500,000
I lose $225,000 and
The US Treasury loses $275,000.
That's not bad for the charitable deduction which is justified by the statement that people shouldn't be taxed on the money that they earn which they give away instead of consume. And, indeed, an ordinary man taking the charitable deduction when his marginal rate is 20% will only take 20% off his taxes.