Sunday, November 21, 2010

It's time to rethink mortgage tax breaks

The Great Recession demolished one myth about owning a house, that values never go down. Now it's time to jettison the one about tax deductions for mortgage interest payments.

It goes something like this: The American Dream itself depends on being able to deduct the interest you pay on your mortgage. Cutting, capping or dropping it altogether will -- take your pick: depress home values; make it harder for minority families to buy a house; lower the overall ownership rate, and destabilize society at large.

While it may be true that owning a home has tremendous social value, there's little proof that being able to deduct the interest payments on a mortgage is essential to fostering an ownership society. In fact, the plethora of tax incentives may have contributed to the financial mess many homeowners currently find themselves in.

In recent weeks, two bipartisan deficit panels have recommended eliminating mortgage interest deductibility or replacing it with a direct credit as part of a broader plan to reduce spending, raise taxes and lower the federal deficit.

These plans, which both include tax simplification and sharp reductions in income tax rates, are a long way from becoming law, but they have initiated much-needed conversations about a variety of sacrosanct special interests and tax incentives.

The chief argument against mortgage interest deductibility is that it is expensive and inefficient. It will cost the U.S. Treasury about $130 billion -- almost three times the annual budget of the Department of Housing and Urban Development -- in 2012 alone. While we're at it, let's tack on another $31 billion for the deductibility of property taxes, and about $50 billion for the exclusion of capital gains on the sale of residential property.

Most of these financial benefits accrue to people in the highest tax brackets -- the people who don't need a subsidy to buy a house in the first place. A 2008 study in one economics journal concludes that households with incomes exceeding $250,000 receive 10 times the tax savings from interest deductibility as households earning between $40,000 and $75,000.

The incentive also distorts choices, encouraging people who receive the smallest benefit to live in a more expensive home. Who hasn't had a real estate agent whisper in their ear that, "the more house you buy, the bigger your tax break"?

Worse, these tax incentives have not led to higher U.S. homeownership rates, which stood at just under 67 percent this past summer. Canada's homeownership rate is 68 percent despite never having allowed interest deductibility. Great Britain eliminated mortgage interest deductibility in 2000, and the homeownership rate climbed. It's about 68 percent.

Mortgage interest deductibility isn't the only proposal in the recent deficit reduction plans, but few have as many advocates. The housing industry represents about 16 percent of the United States' gross domestic product, and loud opposition to the proposal from Democrats, Republicans and industry interests illustrates why it's often called, along with Social Security, "the other third rail of American politics."

The National Association of Realtors weighed in immediately, with economist Lawrence Yun predicting that eliminating the deduction would reduce home values by an additional 15 percent and destroy family wealth.

"Since the inception of the tax code nearly 100 years ago this has been seen as an appropriate social deduction," said Christopher Galler, chief operating officer for the Minnesota Association of Realtors. "Why change the rules on people now?"

But rules change as society does, usually not with the devastating effects that industry groups often predict. Consumers didn't cut up their credit cards in 1986, for example, when the Tax Reform Act ended tax deductions for interest payments on credit card debt.

That legislation for the first time made a special carve-out for mortgage interest deductions. A year later, Congress enriched the benefit by allowing consumers to deduct interest payments on home equity loans. Presto! Interest payments on that LCD television or Mexican vacation became tax-deductible.
This is not the first time someone has suggested eliminating mortgage interest deductibility. The first failed effort was in 1963. Sen. Ted Kennedy tried in 1980, and a budget advisory panel convened by President George W. Bush in 2005 recommended replacing it with a smaller credit. The panel also recommended eliminating the deduction completely for second homes and home equity loans.
"There's a vast and powerful lobby behind that tax deduction, so I have a hard time seeing how it ever passes," said Alex Stenback, a Twin Cities area mortgage banker and author of a closely read industry blog, Behind the Mortgage.

George Karvel, a professor of real estate at the University of St. Thomas, believes that mortgage interest deductibility does provide a valuable incentive toward homeownership, and he cautions against doing anything drastic now, given the fragile state of the housing sector.

"For many people, being able to deduct their mortgage interest might be the only thing keeping their head above water at the moment," Karvel said.

Still, Karvel likes the idea of eliminating the deduction for interest paid on second home mortgages, and interest payments for newly issued home equity mortgages. And he thinks there might be support for limiting the deduction on primary residences to mortgages of $500,000 or less.

He thinks the odds of something happening this time around might be better than ever because of growing awareness of the financial challenges affecting the country's long-term prosperity.

"What is slowly being recognized by the public and politicians alike," Karvel said, "is that our governments have made promises to deliver future benefits, in Social Security, in Medicare, that they will not be able to deliver on unless we start acting now."

Thursday, November 11, 2010

Panel stresses urgency of closing achievement gap

progress, political winds, education

 Higher Ground Academy Founder-Director Bill Wilson
 Credit: Shane of Necessary Exposure

But shift in political winds could stall progress

Putting students first is among the most important things to be done if ever the Black-White student achievement gap is to be closed, several education professionals and advocates agreed at a recent public exchange of ideas on the subject. Higher Ground Academy Founder-Director Bill Wilson, St. Paul Public Schools Superintendent Valeria Silva, Minnesota State Representative Carlos Mariani (DFL-St. Paul), St. Paul Mayor Chris Coleman, and St. Paul Federation of Teachers President Mary Cathryn Ricker addressed the issue during a 90-minute education panel discussion November 3 at Macalester College.

Based on Minnesota statewide math and reading test scores, the educational achievement gap between Blacks and other students of color and Whites starts at around 30 percentage points as early as third grade and continues to widen the remainder of their school years. “We do well with many students,” but not with Black students, admitted Silva. “We have to start owning that our African American students are not achieving the gains they should be.”

Many Black children “cannot see the return on investment… They are discouraged” by school, noted Wilson, who added that more early childhood programs are needed. “The teaching of children must start at least at six months [of age and] then go forward.”

If the gap were reversed and White students performed academically poorer than Blacks, Mayor Coleman believes “there would be a riot.” 

Said Ricker, “I believe every student should have a high school diploma” no matter how long it takes.

“The achievement gap exists because of a disconnect between students and teachers,” believes Wilson. 

“I’m not an educator but a politician and policymaker,” said Mariani, executive director of the Minnesota Minority Education Partnership (MMEP), which since 2001 has annually tracked the academic progress of Blacks and other students of color.

The 2009 MMEP report noted that the chances of students of color “successfully graduating from high school…are not much improved from eight years ago.” 

Mariani agreed with Wilson that educators “making connections” with both students and their parents is “how you close the gap.”

“There’s no silver bullet,” said Coleman, adding that developing “out-of-school programs” at local libraries and parks is needed. Because the overall population in Minnesota is becoming “less White and more diverse,” closing the achievement gap is becoming increasingly important for Minnesota’s economy, whose workforce needs to be “highly educated,” Coleman said. To help close the gap, “It takes everyone [in the community] to take a role.” 

“This is an urgent matter,” Silva said, “but not just for us as educators. [It’s also urgent] for everybody that is working to improve the quality of life of students and families in the city.” 

The superintendent pointed out that education “is not a priority” nationwide as well as in Minnesota. “Education is not cool in America.” 

But last week’s panel might have been a “preaching to the choir” experience for many of the 150-175 persons in attendance, who were either students studying education or persons working in education. That’s how it looked to Macalester Humanities, Media and Cultural Studies Professor Leola Johnson 
“They [the panelists] are talking about things that people in the audience already agree with,” Johnson said. “What we actually need to do is to persuade people who don’t agree, but those people don’t show up at forums like this.”
Nonetheless, each participant on last week’s achievement gap panel “is clearly committed to doing their part [in] solving this problem,” noted Ricker. 

“We all came here saying, ‘This is what we all are doing to solve this problem,’ and we only got to scratch the surface on what we actually are doing. 

“If anything, this gave me the opportunity to continue the conversation with everyone here,” Ricker said. “We need to have the right conversation.” 
Wilson says he’d suggested further meetings with Silva, Mariani, Coleman, Ricker and others to work on solving the gap problems: “I am going to call the mayor and ask if he would host that meeting.” He also urged a closer look at area charter schools such as his Higher Ground Academy in St. Paul. 

“We have a population that is 85 percent East African, and we are making AYP [annual yearly progress] every year,” Wilson pointed out. “Let’s sit down and talk about what we are doing, and we’ll get some answers from others. If we’re really serious about that, I think that is going to be done.”

“There are so many issues here, but for me the primary issue was to really encourage this community to embrace the necessary competencies to build a great multi-racial community,” said Mariani. “Our inability to do that is one of the big things that are hurting our kids in our schools. They don’t feel a part of this system in so many ways.”

On the day after last week’s general elections, which resulted in a changeover of power from Democrat to Republican in both the Minnesota House and Senate, Mariani expressed concerns about future education funding. 

“While money shouldn’t be the total answer, it’s very difficult to do new things without the resources as well,” he said. “I think that the new majority has made it clear that not only will there not be any new resources, but actually there will be less.

“[It] wasn’t perfect under Democratic control either,” the DFL legislator noted, but he’s uncertain if “the new political realignment will further the discussion of multi-racial competency, equality and equity. I think it is going to be really tough.” 

“I think there is a real danger that [the achievement gap issue] will be pushed back” among legislative priorities, Johnson said. “We’ve got people who have come to power now who ran on getting rid of the Department of Education and who really would love to privatize everything. I think that there is a real possibility that, at the very best, what we are going to get is gridlock and stalemate.”

“I think if we put all of our ideas in one place, we really can accomplish a lot,” concluded Silva. “If there is any place in this country where we can close this achievement gap, it is in St. Paul. I really believe that.”

Charles Hallman welcomes reader responses to challman@spokesman-re

Facebook, freedom and thin-skinned bosses

By Bruce Barry, Special to CNN
November 11, 2010 -- Updated 1434 GMT (2234 HKT)
  • Bruce Barry: Losing private-sector job over a Facebook remark doesn't violate freedom of speech
  • Employers shouldn't view offhand remarks on Facebook as threats, he writes
  • Barry: National Labor Relations Board says comments may be protected under labor law
  • Workers shouldn't forfeit rights, he says, and thin-skinned bosses can scare away talent

Editor's note: Bruce Barry is professor of management and sociology at Vanderbilt University and author of "Speechless: The Erosion of Free Expression in the American Workplace" (Berrett-Koehler, 2007).

Nashville, Tennessee (CNN) -- The recent news item about a Connecticut worker fired for Facebook postings that annoyed her employer, like other accounts of employees sacked for private speech, was bound to draw a lot of attention. Americans hold First Amendment rights to free speech as a kind of sacrosanct birthright, and for many of us the idea that you can lose your job for expressing private thoughts away from work offends the core principle of freedom of expression.

In fact, though, firing a worker for off-the-job speech that unsettles an employer is pretty routine, and for the most part very legal. The First Amendment and the rest of the Bill of Rights protect us from infringements on our liberties by acts of government, not from the oppressive acts of nongovernmental actors such as private-sector employers.

Combine that with the labor law concept of "employment at will," which makes it possible to fire someone without due process for just about anything short of discrimination, and you are left with an American workplace where free expression has scarcely more moral credibility than employee theft. A particularly eye-catching example is an Alabama woman who lost her job -- with no legal recourse -- during the 2004 election season because her Republican boss didn't like the John Kerry bumper sticker on her car in the factory parking lot.

Widespread use by just about everyone of online networks and social media opens new opportunities for workers to engage in personal expressive activity that might arouse the notice and disapproval of one's employer, and by extension opportunities for touchy or paranoid employers to police and punish essentially harmless extracurricular speech.

So in a sense, the situation involving Dawnmarie Souza, the Connecticut emergency medical technician fired by an ambulance services firm for posting negative comments about her boss on Facebook, is just the latest skirmish in an ongoing conflict between employers' desire to keep workers in line and the rights of employees to live their private expressive lives without unwarranted employer interference.

Holding a job should not require giving up your right to an expressive private life.
--Bruce Barry
Fired for Facebook?
Dare to trash your boss on Facebook?

But there's a wrinkle that makes this case important: the involvement of the National Labor Relations Board (NLRB), which contends that Souza's Facebook comments could be protected activity under labor law. Americans don't enjoy general free speech protections against infringement by a private employer (with some limited exceptions, such as certain kinds of whistle-blowing). But federal labor law does grant union-eligible workers the right to engage in "concerted activity" for the purpose of "mutual aid or protection" -- essentially, to communicate with each other about working conditions and terms of employment. Those same federal laws bar employers from interfering with workers' efforts to improve their work situations.

If Souza had dissed her boss in, say, a blog post or a letter to the editor, her expressive act would likely earn no protection against her employer's wrath. But on Facebook her comments catalyzed responses from and interaction with some of her co-workers. That online "conversation" involving Souza and other employees of the same firm is what the NLRB alleges could amount to protected concerted activity. If the courts agree (at this point it's just a charge by the NLRB, with a hearing slated for early next year) then Souza's dismissal was illegal.

When this case does reach a courtroom, lawyers will tussle over the nature of social media sites. Does interaction within a closed Facebook circle of friends amount to private conversation, or are negative comments about one's job or boss on Facebook the equivalent of a public statement that could affect a firm's reputation? Does it matter how big one's network is? How many co-workers have to chime in to the conversation to make it "concerted" activity?

Until this works its way through the courts, employment lawyers are advising corporate clients to ensure that employee policies regarding internet use are not written so broadly that they chill workers' exercise of their associational rights under labor law.

Souza's situation turns more on labor law protections than on constitutional free-speech rights because she worked for a private-sector employer. The First Amendment does afford more protection to public-sector workers, but government employees reading this shouldn't get their hopes up. Federal court decisions along with developments in management practice have combined to make even the public-sector workplace rather inhospitable to employee free-speech claims.

Consider the cautionary tale of Ashley Payne, a Georgia public school teacher forced to resign last year when administrators learned in an anonymous email about pictures of her on Facebook holding an alcoholic beverage during a trip to Europe. According to the Atlanta Journal-Constitution, Payne kept her network settings private, and never friended any students. A year later, as her case crawls through the legal system and she awaits her day in court, Payne is still unable to find a teaching position.

A common reaction among working professionals to stories such as Souza's and Payne's is to advise people to manage their online presence and their digital footprints more carefully and prudently. Avoid giving your employer a reason to frown on your online expressive activity, goes the argument, even when you do it on your own time, on your own device, and on private networks. This is reasonable advice to the extent that it equates to "avoid being really stupid," but it's unfortunate advice if it counsels individuals to suppress their own private expressive life as a career strategy.

To be sure, employers need not tolerate any and all extracurricular speech by workers that might genuinely pose a legitimate threat to the firm's interests or to its workplace harmony. If I worked for CNN, with a spare-time hobby maintaining the web site, it certainly shouldn't behoove my employer to retain my services in the name of some abstract notion of off-work freedom of personal expression. Employers need not allow workplaces to become debating societies or free-for-alls for hostility and harassment.

But it's troublesome when employers favor a management culture so bent on predictability and control that even mild or tangential departures from expressive conformity are treated with suspicion and rebuke. Employees will kvetch about jobs and bosses until the day there no longer are jobs and bosses, and enlightened employers understand that new technological vehicles for said kvetching will inevitable emerge and evolve.

Holding a job should not require giving up your right to an expressive private life, even if you might be prone to the occasional untoward remark about the people who sign your paycheck. Cultivating a thin-skinned managerial impulse to treat workers' expressive activities as existential threats to the enterprise isn't how you manage a workforce; it's how you chase talent away to your competitors.

The opinions expressed in this commentary are solely those of Bruce Barry.

Wednesday, November 03, 2010

Delta attendants say 'no' to union - Claims of moving "onward and upward" by some workers

November 3, 2010
Flight attendants at Delta Air Lines narrowly rejected union representation in the first of three votes to organize the majority of employees at the world's second largest airline.
The results, announced shortly after the close of voting Wednesday, were 9,544 votes against the union, and 9,216 in favor of the Association of Flight Attendants (AFA) or other unions. The margin was 328 votes, or 1.7 percent.
AFA President Pat Friend said Delta's management ran "the largest anti-union campaign that this country has ever seen" and the union would challenge the fairness of the election and seek a revote. Delta rejected the union's claims as "ridiculous" and said it looked forward to integrating its workforce two years after the merger of mostly nonunion Delta and heavily unionized Northwest Airlines
If the result stands, it means that 7,200 former Northwest flight attendants, including 1,900 based in Minnesota, will no longer be represented by the union or be covered by their existing contract. Delta said it will announce a transition plan for those workers at a later date.
More than 93 percent of Delta's 20,100 flight attendants voted in the election, which has been underway since Sept. 29 by telephone and the Internet.
At Minneapolis-St. Paul International Airport, a major Delta hub, some flight attendants stepping off parking shuttle buses Wednesday afternoon expressed sorrow and disbelief that their union could disappear.
"They said we have to take off our union pins -- now," said Mary Beth Balzart, a 23-year flight attendant who burst into tears as she entered the Lindbergh Terminal and reached for the tiny white AFA pin on her uniform. "It's just really sad. Not only did we lose Northwest Airlines, but now we also lost our union."
Several workers who supported the union were fearful of saying anything, or declined to give their names. Union opponents showed less reserve.
"Delta has been good to us without a union," said Suzette Klein, an 11-year flight attendant who voted against the union. Another "no" vote, Helena Luke, who has worked for Delta for four years, said, "I'm happy that there is no union. They tend to slow down progress. So I say, onward and upward."
In Atlanta, Mathew Palmer, a Delta flight attendant who helped organize the "No Way AFA" campaign that included rallies, a Facebook page and a website, was jubilant. "We as a group cannot be higher than our planes fly,'' he said.
Palmer said many former Northwest flight attendants believed the union had failed them. "They have a contract, yes, but what is that contract worth?" he said, noting that Delta workers' pay exceeded that of pre-merger Northwest attendants under their union contract. "So it really makes you question, what value is this union I have?"
Delta, based in Atlanta, had 12,900 non-union flight attendants before the merger with Northwest. The airline's other hubs are in Detroit, Memphis, New York, Salt Lake City and Cincinnati. This is the third time the AFA has lost a union election at Delta since 2002.
The decision by Delta flight attendants was the first of three winner-take-all union votes that affect 50,000 Delta workers. Two other elections that wrap up in the next two weeks will determine whether baggage and cargo handlers and passenger agents -- long unionized at Northwest, but not at Delta -- will be represented by the International Association of Machinists.
Delta Air Lines has long been among the least unionized of the major carriers. Delta's pilots and flight dispatchers have unions, but the airline's record of paying well has largely kept other unions out. The Northwest merger brought its heavily unionized workforce to Delta, creating an untenable mix of union and nonunion workers that is being resolved in these showdown elections.
Union leaders said they will ask the National Mediation Board to investigate allegations that Delta interfered with the election through mailings, e-mail, intimidating contacts with workers and a breach of voting secrecy on company computers.
It could take months for the federal agency that oversaw the election to investigate the union charges and determine whether another vote is justified. Earlier this year, another Delta union won a revote for the airline's flight simulator technicians because of management interference, though the workers still rejected the union in the second election.
Delta said interference charges are common after union elections. "The AFA clearly plans to continue its fear-and-smear campaign, even after our flight attendants have decided," it said in a statement.
The AFA last month complained to the mediation board that Delta encouraged flight attendants to use the airline's computers to vote, a possible breach of ballot secrecy. But Delta, in a statement, said airline computers also were used to vote in the 2008 AFA election, and nobody complained. • 612-673-7090 • 612-673-7725
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