Gas Prices Driving Teleworking Issues

The soaring cost of gasoline is making teleworking more popular, and both homeowners and the environment benefit.

Anyone who used their vehicle to get away for the Memorial Day weekend is now acutely aware of the high cost of gasoline. Energy costs have been a driving factor in support of both governmental and company policies that are becoming friendlier to teleworking. Other factors include environmental and quality of life concerns, and corporate cost pressures.

In the private sector more companies are allowing employees to work from home one or more days a week, or work the same number of hours over four instead of five days in the office. More employees are asking for that opportunity, and employers are increasingly recognizing that those options can help them attract and retain better employees. For growing companies the practice of encouraging telecommuting can reduce or defer the need for expensive additional office space.

Transportation costs are one of the factors that are inspiring more and more homeowners to create home-based businesses. Many technology-intensive home based businesses are not dependant on urban or suburban locations. The cost of living (and especially the cost of homes) in more rural areas is far less. An urban or suburban homeowner’s equity can enable many to cut their mortgage payments on a rural home substantially, and in some cases may be enough to buy an equally nice home for cash. Few miss the long rush hour traffic jams and many also feel good contributing far less to the environmental challenges created by auto emissions.

The federal government has been supportive of telecommuting for its employees, and the results have been impressive. In positions where telecommuting has already been allowed, 19% of those federal workers take advantage of the opportunity. Some agencies are beating those averages. About 3,000 of the 8,500 employees of the U.S. Patent and Trade Office, telecommute regularly. According to the Washington-based Telework Coalition, 45 million Americans telecommute at least some of the time, according to their 2005 study.

Teleworking is bound to increase. In March, Senators Ted Stevens (R-AL) and Mary Landrieu (D-LA) introduced legislation that would make it easier for even more government workers to telecommute. The bill would create a full-time "telework managing officers" to facilitate teleworking.

The American Homeowners Grassroots Alliance (AHGA) supports this worthy legislation, and would like to see comparable legislation to encourage more teleworking in the private sector. The most efficient way to do that in the private sector may be to create tax incentives for employees, employers, and home based business owners. “Even a modest tax credit might tip the scale in favor of more teleworking” said AHGA President Bruce Hahn. “If you provided homeowners a tax credit for creating new home based businesses, it might encourage more to consider this option. You could also allow a company and an employee to split the same tax credit in order to encourage both employers and workers to support teleworking.” he added.

Homeowners and the Exaflood

It has nothing to do with Hurricane Katrina, but the exaflood will have a significant impact on many more homeowners.

Most homeowners and other consumers have never heard of the term, but in fact it will have an increasing impact on their ability to benefit from technology. Homeowners use Internet-based technology more and more every year. "Exaflood" is derived from the term exabyte, or 1.074 billion gigabytes. Two exabytes equal the total volume of information generated in 1999. The Internet currently handles one exabyte of data every hour. “By 2010, 20 typical households will generate as much traffic as the entire internet moved in 1995.” according to John Chambers, CEO of Cisco. This mushrooming consumption of data is pushing the Internet to its limits.

Perhaps the biggest driver is video applications, although many home based businesses are also web-based, and telecommuters can also use a lot of bandwidth. We can blame part of it on our kids (some things never change): YouTube alone consumes as much bandwidth today as the entire Internet consumed in 2000. Users upload 65,000 new videos every day and download 100 million files daily, a 1,000 percent increase from just one year ago.

Adults aren’t innocent either – think for a moment how much more you use the Internet today than a decade ago, and what you use it for. You probably use it a lot more, and you probably use it for things that consume a lot more bandwidth than just sending emails.

What are the implications of the exaflood? If we can’t grow smarter and more robust networks fast enough to get the exploding amount of digital content to our homes we won’t be able to take advantage of the opportunities or the content. It will limit the ability of all businesses – including technology dependant home based businesses - to grow and prosper. It will limit out ability to use the Internet as an educational tool, and limit the application of new generation medical technologies, such as wearable wireless medical monitoring devices that will allow chronically ill patients to remain in their home while their conditions are monitored remotely 24/7.

As new content proliferates, today's high-speed connection could become tomorrow's traffic jam. We should not fear the exaflood, but we do need to prepare for it. Although our per capita data consumption has increased dramatically and costs for things like Internet connection and video services have in many cases dropped, the U.S. is dropping behind other countries in broadband access speeds. Meanwhile the exaflood waters continue to rise.

We will need ongoing investment in content, massive upgrades of infrastructure and relentless innovation to handle the amazing growth in data traffic. We need advancements in how we build and operate networks, including new file compression technologies, upgraded traffic management software, better spam and virus filters, and new delivery platforms. And we need substantial investments in short-haul bandwidth through fiber optics to homes, broadband over power lines, satellites and fourth-generation wireless networks.

The big question is how to encourage an Internet infrastructure that continues to be robust enough to handle all of the new data. Policymakers need to focus on this important challenge. Because of economies of scale, more users will generate more revenues to fund the additional substantial business investments need to strengthen the technology infrastructure. Congress should pass legislation that encourages more homeowners and other consumers to utilize the Internet infrastructure. This includes permanently extending the Internet tax moratorium, building broadband-ready public housing, and developing tax incentives that will encourage the deployment of broadband access to rural and other underserved homeowners, and encourage homebuilders and homeowners to build or modify technology ready, or “smart” homes.

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Property Tax Revolution Expanding

Home values rose 1% last year, but property taxes went up 7%.

Thirty years ago California homeowners voted to pass Proposition 13, a voter initiative that limited real estate property taxes to 1 percent of the market value of the property. Now nearly thirty years later, as homeowners across the country are opening their 2007 real estate assessment letters, many may be thinking that its time to pass prop 13 in other states.

The reasons are obvious. Property taxes have increased a lot faster than wages. Between 2002 and 2004, average U.S. wages went up about 3% annually. During the same period property tax collections increased 6.5% annually. Some went up a lot more. Between 2000 and 2005, Wyoming and Washington, D.C. residents saw their real estate taxes increase by 49% and 42%, respectively. New Jersey had the nation's biggest property-tax bills, at $2,206 per capita, up 13% from 2000.

Many local governments knew just what to do with that newfound revenue. They spent it, often on programs that had multiyear commitments.

In Northern Virginia, high real estate appreciation was accompanied by double-digit percentage increases in the budgets of Arlington and Fairfax counties between 2003 and 2006. Though home values have declined prior county commitments necessitated 2007 real estate tax-rate increases of 1% to 5% to sustain their spending. One real estate agent said that “We are seeing many homes in Arlington, especially condos, that are assessed at well over what they can be sold for today. There is no way the county can afford to correct those overcharges without threatening their budget”.

Another target for increases is real estate transfer taxes, assessed like a sales tax on the sale of a home. A proposal to quadruple Virginia’s real estate transfer tax was defeated in 2006 thanks to concerted efforts of the state real estate association and AHGA. This year Virginia Governor Tim Kaine signed eminent domain reform legislation intended to limit abuses in local government takings of property rights. AHGA is currently working with the North Carolina real estate association to defeat a proposed real estate transfer tax in that state.

In Florida a major move is afoot to overhaul the property tax structure. The housing market is in a slump, and more and more Florida homeowners are talking about moving to other states where real estate taxes are cheaper. Florida home prices are likely to fall by 10% to 15% this year alone according to a Goldman Sachs study. In June, the Florida state legislature is convening a special session that could result in legislation providing substantial property-tax relief. The result could be property tax reductions of more than $30 billion over the next five years. That number dwarfs more modest retrenchment efforts at the state and local level in other states.

AHGA has urged Florida legislators to approve reform of the Florida property tax structure. Whether the Florida effort will succeed remains to be seen. If it does it will likely stoke the fires for similar efforts in other states that have seen real estate tax increases.

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More Congressional Action on Mortgage Lending

In a race against time Congress is considering a variety of bills that will help mitigate problems caused by a combination of stagnant real estate markets and the subprime mortgage meltdown.

In May the House of Representatives passed the Federal Housing Finance Reform Act. The legislation would create a fund to promote low income home ownership and strengthen oversight of Fannie Mae and Freddie Mac. The bill creates a new $500 million affordable housing funding program will help expand home ownership, thereby bolstering home values. Fannie and Freddie would have to contribute an amount equal to 1.2 basis points of their outstanding mortgages to the fund. Provisions in the bill imposing lending restrictions on Fannie Mae and Freddie Mac were removed prior to the final vote. The lending restrictions would have undermined the two government-sponsored entities' (GSE’s) ability to provide revenues to the fund and to address the kinds of problems we now face in the mortgage sector.

As a result the final bill was an even better piece of legislation from the perspective of homeowners.  "We will now have a strong new regulator to restore confidence in the GSEs.  It will keep housing finance affordable and begin the important task of providing needed housing in the Gulf Coast," said Rep. Barney Frank, Chairman of the House Committee on Financial Services. Unfortunately, the outlook for action in the Senate is uncertain.

The House Financial Services Committee also passed a Federal Housing Administration overhaul bill earlier this month, and the full House is expected to take it up in June. The legislation increases loan limits in areas with high housing costs including California, the Northeast, and the central east coast. Some FHA profits would be set aside for use in an affordable housing fund and used to help pay for better technology for the FHA program. The legislation allows FHA to provide up to 100% financing, provide better counseling for home buyers with shaky credit histories, and establish insurance premiums related to the borrower’s credit risks. While not specifically aimed at those with subprime mortgage problems, with FHA rates about 3% lower than comparable subprime rates, the program would likely benefit those who could qualify. Unfortunately the legislation may have problems in the Senate where a similar bill failed last year.

On the Senate side foreclosure-prevention legislation was introduced in mid May by Senate Banking Securities and Insurance Subcommittee Chairman Jack Reed, (D-RI). The Homeownership Protection and Enhancement (HOPE) Act would increase funding for financial counseling agencies approved by HUD. It would also fund almost $300 million for loans that states could provide to homeowners facing foreclosure.

Senators Blanche Lincoln (D- AK) and Gordon Smith (R-OR) introduced legislation that will extend the federal income tax deduction for mortgage insurance premiums for low- and middle-income homebuyers. “This income tax deduction for mortgage insurance premiums will help many families buy homes and achieve the American dream,” said AHGA President Bruce Hahn. “But this important tax deduction was approved only for 2007, and now it is up to Congress to extend it to ensure that families who qualify continue to benefit from the tax break.” This is the first time that qualified families who buy or refinance their homes with low down payment loans will be able to deduct the cost of their mortgage insurance premiums. Private mortgage insurance premiums are now fully tax deductible for borrowers who buy or refinance a home this year if their adjusted gross income is $100,000 or less. Senator Charles Schumer (D-NY), introduced The Borrower's Protection Act. The legislation, would apply federal enforcement standards of the Truth in Lending Act (TILA) to all mortgage brokers.

Legislation that would exempt all debt forgiveness on primary home mortgages from treatment as income by the IRS has been introduced in the House of Representatives. Under current tax rules forgiven debt can be treated as taxable income. Growing numbers of mortgage lenders have been willing to settle for less that the full amount of the outstanding mortgage balance so that cash-strapped homeowners with homes worth less than that could sell their homes. In cases where the homeowner could not make the payments anyway, the practice allows the bank to get most of their money back and a nonperforming loan off their books. However, if the homeowner doesn’t even have enough money to make their mortgage payments, the federal tax liability would force them into bankruptcy. The Mortgage Cancellation Relief Act (H.R. 1876), co-sponsored by Rep. Robert E. Andrews and Rep. Ron Lewis, is now before the House Ways and Means committee. AHGA supports the measure and hopes that Congress will adopt this additional tool to mitigate the efforts of the soft real estate market and subprime loan crisis.

Another bill that could help affordability is the FHA Manufactured Housing Loan Modernization Act, a measure that will help thousands of potential homeowners across the country with Federal Home Administration (FHA) loans for manufactured housing.  The bill will modernize the FHA Title I Personal Property Manufactured Loan Program, and is intended to stem a decline from some 30,000 loans a year 10 years ago, to less than 2,000 loans a year in recent years.  "The FHA Manufactured Housing Loan Modernization Act of 2007 would fix the problems with the current FHA Title I loan program and increase the number of loans available to buyers of manufactured housing," said Rep. Joe Donnelly (D-IN), the sponsor of the bill. "If we increase the number of people who are able to buy manufactured housing, we allow more Americans to achieve the dream of homeownership."


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Don’t Tax the Net

Congressional action is needed to protect consumers from new and unfair Internet taxes.

As the Internet grew into a larger vehicle for commerce, many state and local governments saw new opportunities to generate additional tax revenues. Over a decade ago they sought to tax consumers on their Internet access services. However this would have been double taxation, since the primary means of Internet access at the time was through telephone wires, and telephone service was already taxed (and taxed and taxed) at many levels. State and local governments also sought some additional taxes that discriminated against Internet commerce.

As a result Congress passed the Internet Tax Freedom Act (ITFA), which bars discriminatory taxes on e-commerce and bans taxes on Internet access. It was widely supported by consumers and groups such as the American Homeowners Grassroots Alliance (AHGA). Public opinion polls were strongly opposed to Internet taxation, clearly demonstrating that the efforts of state and local governments to expand their tax base didn’t reflect the will of their constituents. As a result homeowners presently don’t have to pay a tax on their Internet access, and states can’t discriminate against Internet commerce through higher tax rates.

ITFA expires on November 1 of this year. Unless it is extended state and local governments will be free to tax Internet access. Two committees of Congress have held hearings on whether to make ITFA permanent. Legislators have already introduced several different bills to make ITFA permanent (S. 156, H.R. 743, and H.R. 1077). The Don’t Tax Our Web Coalition, a group (including AHGA) that supports a permanent extension of ITFA, has been formed and has testified at the hearings.

Around the same time that state and local governments were seeking discriminatory taxes on e-commerce and taxes on Internet access, they also sought through another effort to mandate sales tax collection on all Internet sales. However, they were blocked by an existing U.S. Supreme Court decision that protected consumers from having to pay their state’s sales taxes to companies located outside of their home states. This explains why most catalogue companies and Internet sellers do not collect sales taxes from most of their customers.

To force consumers to pay sales tax on all of their Internet purchases, the state and local governments sought federal legislation to overturn the Supreme Court decision. If the legislation to overturn the Supreme Court decision ever passes, homeowners and other consumers will have to pay sales taxes on most of their Internet purchases. In addition, if they hold an Internet yard sale on eBay or craigslist, or have a home-based business that sells products on the Internet through their own or other websites they may also have to collect sales taxes from all buyers and remit them to the appropriate state and local taxing authorities.

There are thousands of state and local taxing authorities, each with its own set of differing sales tax rates for different products. Requiring homeowners and other consumers to provide tax collection services for state and local governments in the other 49 states would be quite a chore for them. It would create challenges for the over 10 million eBay sellers for example, many of whom are really just homeowners who decided to have this year’s yard sale online, as well as the many small home-based Internet retailers. It would also be unfair because non-Internet businesses, such as mail-order catalogue companies and magazine publishers are not required to collect sales taxes for other states.

For this reason AHGA is opposed to state and local governments expanding Internet sales tax collections through federal legislation repealing the Supreme Court’s prohibition. The repeal would be part of a bill to implement the state and local governments’ “Streamlined Sales Tax Initiative”. The state and local governments are trying to simplify and rationalize the many different state and local sales tax rates. Under the federal legislation, once that effort achieved certain milestones the Supreme Court decision prohibiting expanded Internet sales tax collections would be voided and states would be free to require you to collect their sales taxes for them.

On its own AHGA believes that the goal of simplifying and standardizing the many different state and local sales tax rates is a very good idea, as long as total sales tax collections remain the same or are reduced. Federal legislation isn’t required for state and local governments to cooperate in order to achieve that. It is not a sufficient justification for overruling the Supreme Court decision and allowing a massive expansion of Internet sales tax collection.

In addition to other reasons for supporting a permanent ITFA and opposing the Streamlined Sales Tax Initiative, AHGA believes that the Internet provides profound benefits to society. It is an important tool for educational research for students and provides consumers a means of saving time in ordering products and services and paying bills. It helps reduce automotive pollution. New developments in medical technology will soon make it possible for homeowners with chronic illnesses to remain in their homes while their conditions can be remotely monitored 24/7, thanks to wireless wearable medical monitoring devices.

Broadband access isn’t available in some areas and to some consumers. New or unfair taxes on the Internet, taxes on Internet access, and expanding Internet sales tax collection will all slow the Internet’s growth as a tool for commerce. The result will be to restrict the Internet’s benefit to consumers. It will also reduce the revenues that companies must have to make more investments to both expand broadband access to rural and underserved consumers and increase broadband speeds.

Moreover the need for more state and local government tax revenues is questionable. State and local government revenues and spending have already grown substantially in recent years. A big source of that revenue has been a big spike in real estate tax revenues, thanks to double digit home appreciation during the first half of this decade. During that period real estate taxes went up at more than twice the rate of U.S. wages. Clearly state and local governments have been extracting more taxes at far faster than the rate of inflation from American homeowners in recent years, and it is doubtful whether new state and local tax collections that the public generally opposes anyway are justified at this time.

You can help make the Internet tax moratorium permanent and make sure that Congress does not approve the Streamlined Sales Tax Initiative. Please take a few minutes to draft an email to your U.S. Representative and both of your senators and ask them to both make ITFA permanent and to oppose the Streamlined Sales Tax Initiative (feel free to copy any parts of this article to use in your communication). Then use this link to AHGA’s Congressional Lookup to find their email addresses and send it to them.

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