For both problems you cite, the worst case scenario comes down to the situation without that law, right? A startup that has X and Z but not Y, will be no worse with the new law than without it. And if the "new administrative burden" wasn't worth it, startups could ignore it and pay their taxes.

Actually, the worst case might be that the law favors some "startup" companies over others. Already, my three person startup has higher regulatory burden, relatively speaking, when it comes to taxes and payroll processing and such, than a much larger company (who can amortize their team of accountants across tens of thousands of employees). Of course, I'm not saying that it's a showstopper, or that dealing with taxes and payroll is going to kill us or keep us from competing. But, if there were a law that defined my biggest competitor as a "startup" and my company as a non-"startup", and as a result they got free money that I don't have...it warps the competitive landscape.

How big of a difference can this make? I dunno. We don't know the definition or the specifics of what the plan entails. But, for an example of what seemingly subtle favoritism can do, you need look no further than the US broadband market. I'm intimately familiar with this, as my first startup was entirely a business built on selling to independent ISPs (though it had to evolve for reasons that'll be obvious). There were thousands of them in the US ten years ago. Broadband came along, and while everyone agreed that there needed to be some way for competition to happen in the broadband space, it took a long time to come to an agreement on how the line access would be sold (because good ol' AT&T owns pretty much every phone line in the country, and local cable companies own the other option, and those folks, particularly AT&T, know how to buy a congressman). In the end the terms that were reached guaranteed that AT&T and the cable companies could offer broadband cheaper than their competitors that had to rent the lines (while, of course, making it clear to their regulatory overseers that the cost efficiencies that allowed them to sell broadband cheaper than all of their competitors were to be found in places other than the lines). The laws that were intended to allow competition to flourish was merely a subtle death warrant for every independent ISP in the country. There are now a tiny handful of alternative DSL providers that squeak by providing business class services and other premiums. Killed by small differences in the competitive landscape. Would it be so dramatic? No, probably not. But it can make a difference, and it has made a difference many times in history. There's a reason why the biggest companies in the US have teams of lobbyists working constantly for little favors. Laws that give established players just one more tiny leg up over their competitors.

I don't think that Obama's "startup" tax incentives would be any different. He is, after all, a big supporter of corn...aint nothing but lobbyist money driving that machine forward.

That's not to say I don't wish that small startups could avoid some of the regulatory and tax burden that is somewhat heavier on smaller companies. My first startup was definitely slowed down a few times when I got to the end of a quarter and realized I owed Uncle Sam twenty grand (the previous business wasn't very steady...some months were fantastic, some were awful, and taxes would sneak up at the exact wrong time: when things were going well and I needed the cash on hand to keep the good times rolling).