Tax policy and the economy.

• Position: Conferences

The NBER's Eighteenth Annual Conference on Tax Policy and the Economy, organized by James M Poterba of NBER and MIT, took place in Washington, DC on November 4. These papers were discussed:

Susan Dynarski, NBER and Harvard University, "Tax Policy and Education Policy: Collision or Coordination? A Case Study of the 529 and Coverdell Saving Incentives"

Mark E. Doms, Federal Reserve Bank of San Francisco; and Wendy E. Dunn, Stephen D. Oliner, and Daniel E. Sichel, Federal Reserve Board, "How Fast Do Personal Computers Depreciate? Concepts and New Estimates"

Joseph Gyourko, University of Pennsylvania, and Todd Sinai, NBER and University of Pennsylvania, "The (Un)Changing Geographical Distribution of Housing Tax Benefits: 1980 to 2000"

Emmanuel Saez, NBER and University of California, Berkeley, "Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications"

Mihir A. Desai, NBER and Harvard University, and William M. Gentry, NBER and Williams College, "The Character and Determinants of Corporate Capital Gains"

Coverdell Educational Savings Accounts and 529 saving plans are marketed as attractive vehicles for college savings. But Dynarski finds that college savings plans can actually harm some families. The joint treatment of college savings by the income tax code and the financial aid system creates tax rates that exceed 100 percent for those families on the margin of receiving additional financial aid. Since even families with incomes above $100,000 receive need-based aid, the impact of these very high taxes is quite broad. Dynarski finds that an aid-marginal family with funds in a Coverdell is worse off than if it did not save at all. Simulations show that $1,000 of pretax income placed in a Coverdell for a newborn and left to accumulate until college will face income and aid taxes that consume all of the principal, all of the earnings, and an additional several hundred dollars. This perverse out come is the product of poor coordination between the tax code and the financial aid system.

Doms, Dunn, Oliner, and Sichel provide new estimates of depreciation rates for personal computers using an extensive database on used prices. Their results show" that used PCs lose roughly half their remaining value, on average, with each additional year of use. The bulk of that decline reflects the downward revaluation of existing PCs, which is driven by the steep ongoing drop in the constant-quality prices of newly-introduced models. In...