VOLUME IV
I would say you should understand that it’s different from studying economics as an undergraduate. In fact, one of the most difficult challenges that graduate students face is making the transition from being a student to being a researcher, I think. It varies by individual-- some people, as undergraduates, write a senior honors thesis, and they’re already doing research and they just pursue it. Other people think more about studying economics as being a classroom student, then when it comes time to writing a research paper, it’s hard. I think for a lot of people, overcoming that hurdle where you’re really doing your own research is a challenge. If you’re successful, that’s what you need to become an economist. HOW CAN STUDENTS GO ABOUT HAVING THIS TUITION WAIVER CUT, OR ANYTHING LIKE THAT, ESPECIALLY FOR CURRENT STUDENTS? That’s a good question. One question is how will the universities deal with that? As with a lot of things where the federal government is going to make things harder for state and local governments and universities, universities and state and local governments can jump in and try to offset these effects, but of course that is going to cost money. So, we’ll have to wait and see. I THINK WITHIN BERKELEY, ONE OF THE GRADUATE STUDENTS WROTE ONE OF THESE PAPERS AND IT JUST CIRCULATED AROUND, EXPRESSING THIS CONCERN ABOUT WHAT THEY 102
WILL DO? This is a good example of the kind of thing that would benefit from a longer discussion in a few weeks: who is affected by this, and what would it do to access to higher education? We could answer these questions if we had more time, rather than just sort of seeing these provisions appear in a tax bill then scrambling to try to think about what the effects are going to be. A LOT OF THE PROPONENTS OF THE BILL ARGUE THAT REDUCING THE NUMBER OF TAX BRACKETS WILL SIMPLIFY THE TAX CODE. WHAT DO YOU THINK ABOUT THIS? I think that is completely wrong. The number of tax brackets isn’t what makes the tax system complicated, it’s the calculation of the income which involves deductions and credits and provisions like the Alternative Minimum Tax, and other things that make your tax calculation complicated. The tax bracket is just a calculation where you say ok here’s my income, what is my tax on that income. It’s a very simple calculation that you do at the end of calculating your taxes, and whether you have 7 tax brackets, or 3, or a non-linear function which involves essentially an infinite number of tax brackets really does not matter for complexity. WHAT DO YOU THINK THEIR APPROACH WAS IN THINKING THAT REDUCING THE NUMBER OF TAX BRACKETS WOULD SIMPLIFY IT?
It’s a common fallacy and I’m not sure why it hasn’t died. This is not a controversial question among tax policy experts. They will all tell you that thinking about the number of tax brackets is just a waste of time, but it’s an idea that lives on. ANOTHER CONTROVERSIAL ASPECT OF THE TAX BILL IS REMOVING THE STATE AND LOCAL TAX DEDUCTIONS. MANY POLITICAL ANALYSTS ARGUE THAT THIS WAS A MOVE AGAINST BLUE STATES WHERE SUCH TAXES TEND TO BE HIGHER. ARE THERE ANY ECONOMIC REASONS FOR INCLUDING THIS IN THE BILL AND DO YOU AGREE WITH THEM? I think they’re probably right. You might put it a little less negatively by saying that the people putting the bill forward don’t think of this as a very important provision because where they come from it may not be. This is a good example of the kind of provision, the kind of change that might make sense in the long-run but in the shortrun can be quite disruptive. A lot of state and local taxes go to pay for services that some states enjoy. If we had better parks, better schools, better other kinds of public services because we pay higher taxes, it’s not clear why the federal government should subsidize that by allowing deductions. On the other hand, a lot of what states do and a lot the reason why state taxes may be higher is that they may be providing services that are really in the national interest, such as taking care of the poor. It’s not clear that you want the federal government to