Complex System, Poorly Enforced

It depends on the type of subsidies--left unexplained. No Business subsidy should be funded by tax loophole. Enforced Product Price increases are the best subsidy for absolutely essential Business profitability. Less essential Business subsidies should be granted yearly, approved (Application necessary) block grants from something like a Domestic Finance Fund. The general Business subsidies to promote growth should be low tax rates. All other subsidies should be handled by Welfare transfer. lgl

To have loopholes implies having a complex system. The smaller, more efficient, the tax system is the less distortions on the market.

"To have loopholes implies having a complex system. The smaller, more efficient, the tax system is the less distortions on the market."

However, there are cases where distorting the market to achieve a goal may be preferential - like offering tax breaks for charity donations, installing solar panels on your home's roof, etc.

Everyone is hyped up on the possibility of major tax code reform in President Bush's second term. I personally think it would take an act of God to unite the GOP enough to stand up to all the myriad different business interests over on K Street.

What are the advantages and disadvantages of administering subsidies directly rather than as tax loopholes?

Transparency. For the same reason direct subsidies are better than import barriers too.

My biggest complaint is that our convoluted system of tax breaks and incentives aren't distributed fairly. Certain industries get much greater incentives than other industries.

The tax code basically encourages everyone to put their money, not into the most profitable business, but into the business that has the best tax breaks.