Mortgage Interest Deduction in Play

How to Cut Your Gasoline Bill

Just say no to buying that stuff.

American homeowners are using the tools of technology to solve the challenge of $4.00 a gallon gasoline. Rather than drive to mall, they are ordering more products and services online than ever before. Not only are they saving money on gas, they are also reducing vehicular air pollution and traffic congestion. In addition reduced traffic will also save state and local government's money by lowering their road repair and other transportation infrastructure support costs. And, as a bonus, consumers also save time and have more choices in most cases.

Many American homeowners and other consumers are becoming even more intimately involved in Internet commerce. According to an ACNielsen International Research, even several years ago about 724,000 Americans said that eBay was already their primary or secondary source of income. Another 1.5 million generated extra cash by having garage sales online. The recession has driven both of those numbers up, as workers who have lost their jobs are increasingly turning their hobbies into small online businesses.

While society, consumers and state and local governments all benefit from Internet commerce, not everyone is pleased. The oil companies are probably not happy with this trend, and many owners of shopping centers are becoming very distressed. As their tenants’ Internet commerce sales continues to grow far more rapidly than their retail sales in the shopping malls, companies are pushing back against shopping center rent increases and/or not renewing leases.

Some weaker shopping centers have already gone out of business or have been repurposed in ways that better align with the needs of 21st century consumers. Shopping center owners clearly see the writing on the wall. Just as the industrial revolution lead to the decline of the buggy whip manufacturers at the dawn of the twentieth century, technology is doing the same thing to shopping centers in the 21st century. Shopping center owners badly need a means to force more consumers off of the Internet and into their cars for a drive to the shopping center.

They have come up with a clever idea to achieve that goal. It’s called the “Main Street Fairness Act,” which would increase the amount of state and local sales taxes consumers pay on Internet purchases. If the shopping center owners can increase the cost of online purchases, perhaps more consumers will return to the shopping malls. The legislation creates new complexities that may force some of the growing number of small home based e-businesses to quit. First, they would have to determine and collect the sales tax based on their customers location, which is not an easy task since there are upwards of 15,000 state and local sales tax jurisdictions nationwide, and each has different tax rates on different products and services. After determining the appropriate tax rate, the small business owner would then have to identify the taxing authority’s address and send the collected sales tax to them. This arduous process would be repeated for every sale that small businesses made. Small main street merchants that also sell their products online would face the same challenge for their Internet sales.

There is another very big problem with the Main Street Fairness Act. Increasing the collection of sales taxes on Internet purchases goes against the wishes of the vast majority of voters. A 2008 survey by Parade Magazine, asked readers: “Should Internet Sales Be Taxed”? Based on 3,125 survey responses, 85% opposed taxing any Internet sales. Internet tax increases are much more unpopular than other alternatives available to states in need of new revenue to balance their budgets. For example there is far less voter opposition to raising sin (alcohol and tobacco) taxes, or temporary income tax surcharges on the very wealthy.

We believe that the best approach to Internet sales taxes would instead be a permanent Internet sales tax holiday, similar to the temporary sales tax holidays many local governments currently provide for back-to-school or other purposes. Most state governments don’t charge sales tax on products such as prescription drugs, and there are many equally compelling arguments for not taxing Internet purchases. Small home-based and other online businesses will grow as a result of a permanent Internet sales tax holiday. They will hire new workers, providing badly needed jobs at a time when unemployment is still hovering at close to 10%. By reducing the roles of the unemployed we will also help the federal, state and local governments by reducing the need government spending associated with unemployment benefits.

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FTC’s prosecution and Court’s decision may help reduce real estate commissions.

American homeowners are the beneficiaries of the 6^{th d}istrict federal court’s April 6 opinion affirming the Federal Trade Commission’s earlier decision prohibiting multiple listing services from blackballing competitors who charge home sellers less than the prevailing real estate sales commission rates. Real estate multiple listing services (MLSs) are local or regional groups of real estate brokers. They pool the real estate listings of their member brokers and then feed all of the listings to every participating member’s website. Thus a homeowner who lists their home with one real estate agent will be able to see their listing on the consumer facing websites of all the other real estate brokers in the area.

Because nearly 90% of home buyers conduct their searches online, this widespread exposure is critical to the sale of a home. Some real estate brokers have recognized that this exposure is the most critical factor in a home’s sale and is saving them a lot of work. They have unbundled their fees to home sellers and have offered home sellers steep commission discounts for listing the home in the MLS only. Rather than a 6% commission, they charge the home seller only a few hundred dollars. The home seller gets the same exposure they would receive if they were paying a full commission, but the ancillary efforts, such as hosting open houses, and negotiating with buyers aren’t included. Many of these “discount” brokers also offer these additional services on an optional menu basis.

Many traditional real estate brokers have seen the discount brokers as a threat to their ability to maintain high real estate commission levels. They have plotted, through the MLSs that they control, to keep discount brokers and the home sellers they represent, out of their MLS’s database. The Federal Trade Commission has stepped in and stopped many MLSs from this anticompetitive practice. One of them, Realcomp, an MLS in southeast Michigan, challenged the FTC. The FTC had earlier ruled that Realcomp MLS’s policy of prohibiting discount broker members from advertising their listings on Realcomp’s website was nothing more than a transparent effort to maintain high real estate commission levels. The American Homeowners Grassroots Alliance filed a brief in support of the FTC’s efforts in that case.

Realcomp challenged the FTC’s decision before the 6th district federal court. In early April the court decided the case in favor of the FTC and American homeowners. In her decision Circuit Judge Karen Moore concluded that “substantial evidence supports the Commission’s findings that: 1) Realcomp’s website policy gave rise to potential genuine adverse effects on competition due to Realcomp’s substantial market power and the website policy’s anticompetitive nature; 2) the website policy in fact caused actual anticompetitive effects; and 3) Realcomp’s proffered precompetitive justifications were insufficient to overcome a prima facie case of adverse impact. These findings establish that Realcomp’s website policy unreasonably restrained competition in the market for the provision of residential real-estate-brokerage services in southeastern Michigan and the Realcomp MLS area.”

American Homeowners Grassroots Alliance President Bruce Hahn thanked Judge Moore for her wisdom and the FTC for its diligent defense of American homeowners. “This decision means that the issue is dead. Many other MLS’s have tried the same tactic, and the NAR invested heavily in this appeal. They have lost every case. It is time for MLS’s and industry leaders to put this issue behind them and stop wasting their members’ dues money on lost causes that only offend their customers and tarnish the profession’s reputation. Instead they should focus instead on how to better serve their clients and their members.”

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