There are no “loopholes,” there is only tax law. The late Dan Rostenkowski, head of Ways and Means, was fond of saying that the tax code was used to reward your friends and punish your enemies.
The bamboozling was not done by Reagan, but by the Democrats who controlled congress and did everything they could to sabotage Reagan’s efforts.
I agree completely that the Democrats were responsible for the increase in rates, but they knew they were going to do it all along. Republicans then, as now, were too spineless to argue about it, or perhaps they really are just the other half of the Demopublican party. I loved Reagan, but just about every other politician in DC is a snake.