Tax Breaks vs. Subsidies
When or why should government use direct payments versus tax breaks? The answers are more political than economic. One skeptic has argued, “Politicians and economists have a love-hate relationship with tax breaks. Politicians love them and economists hate them.”
For example, follow some of the links in Tyler Cowen’s post about the peculiar impacts of using tax deductions to subsidize health insurance.
UPDATE: Jonathan Gruber writes concerning policies for expanding health insurance coverage
every tax policy is much less efficient than public insurance expansions: while public insurance costs the government only between $1.17 and $1.33 per dollar of insurance value provided, tax policies cost the government between $2.36 and $12.98 per dollar of insurance value provided.
For Discussion. Are there any really compelling economic arguments for using the tax system rather than vouchers or other direct subsidies?