Thanks for the thought-provoking points, Ron. I completely agree that some “loopholes” are good for society. I’d distinguish between (a) the deductions and exemptions that compensate for some market failure (e.g., Ron’s workforce investment example) and (b) the deductions and exemptions that exist solely because someone lobbied effectively for his or her special interest. An example of (b) would be the tax credits companies get for producing ethanol from corn–essentially a subsidy to agricultural conglomerates, as far as I can tell.
Glad you mentioned Clay Christensen’s work. His wider work in this domain, on what he calls the Capitalist’s Dilemma, makes a provocative argument that companies systematically invest too little and unwisely in innovation. See it at https://hbr.org/2014/06/the-capitalists-dilemma.