President Clinton says he wants to tighten tax loopholes governing investments. But critics say he still doesn't understand the critical importance of investments to economic growth.

• He would trim from 70 percent to 50 percent the amount that firms can deduct in their earnings from dividends on their holdings of preferred stock in other companies.

• End the deduction on interest expenses for bonds that take more than 40 years to mature.

• Force investors to use the "average" price they paid for stock when calculating taxable gains.

• Restrict "shorting against the box" -- a practice which lets one defer taxes with the short sale of a stock one already owns.

But critics say capital gains taxes are both wrong (in that they tax capital twice) and bad for the economy (in that they discourage people from putting profits into another investment). As a result, some firms that could grow will stay small. Critics believe the President could get more bang for the buck by eliminating them completely, rather than closing minor loopholes.

Source: Editorial, "The White House War on Investment," Investor's Business Daily, February 11, 1997.