Is the mortgage tax deduction worth it?

My partner and I own a nice little house in Berkeley, CA. We bought a house for many reasons. Vanity was one—we were in our forties when we bought our house, but many of our younger friends, even people in their late 20’s, had already bought homes or apartments. We had to keep up! Plus the prevailing wisdom was that mature people own homes and certainly we think of ourselves as reasonably mature. If you can buy, you should buy. The shortest distance from the working class to middle class was home ownership, etc. And, of course, there was the mortgage tax deduction which makes home ownership even more attractive. In the 1990’s everyone believed all this and bought if they could, many taking on what turned out to be sub-prime loans.

So, imagine my surprise when I realized two things:

1. The mortgage tax deduction is a very regressive tax break as it benefits high income earners far more than low income earners, and the size of the deduction is much higher for more expensive homes (although it does cap at $1 million).
2. Many developed countries do not have a mortgage tax deduction and have just as high rates of home ownership as the USA. Canada is a good example of this.

Even the right-leaning Tax Foundation is against the mortgage deduction, calling it a subsidy for the real estate industry (who, understandably, is in favor of keeping it) and a boon to wealthy people. They debunk the claim that this deduction helps middle class people in any significant way. Further, if you take out a home equity loan (a loan based on the amount of equity you have in your home), you can deduct the interest on that even if you use the money for something other than your home, such as a vacation, a car, or a wedding. People who don’t own their homes have no access to such a deduction.

But the bigger problem with the mortgage tax deduction is that it is a subsidy of debt, and it makes debt (and investment in debt) profitable. This, I admit, I never understood until I came upon an old (Nov 2009) article by the very clear writer, James Surowiecki, in the New Yorker. Surowiecki himself pulled from another source, the iconic John Kenneth Galbraith, who said that financial crises are the result of “debt that, in one fashion or another, has become dangerously out of scale.” Surowiecki points out that we have a tax system that subsidizes borrowing (what economists call a “debt bias”) and claims, “Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked.”

For example, if a corporation wants to expand, it is cheaper for it to borrow the money than to reinvest profits or sell more shares. Business is allowed to deduct all the interest they pay, which gives highly indebted companies more deductions than those which are more profitable and debt free. And now, of course, the government is bailing out these very companies that were over leveraged!

So back to my house. It is true that we had a nice size tax deduction when we first bought the house. The longer we own it, the less interest and more principal we pay, so the savings go down every year. The total amount we will save over our current 15 year loan (we just refinanced) is about $26,000, or a little over $2,200 per year ($6.00 per day/ $42 per week) When I think about how people talk about the mortgage tax deduction, I would have predicted saving much more than that. It is less than I spent last night taking my nieces to the movies. Would I give that up for a fairer tax system? In a heartbeat.

Tax Policy Made For A Weaker Commons

Taxes are our collective investment in the Commons. They provide for our public services, programs and benefits, protect our natural resources, and fund the development and maintenance of our nation’s infrastructure. So taxes are a good thing from a Commons-based perspective. But the thing about Americans is that we’ve been bombarded with anti-tax, anti-government ideology for generations, such that people resent paying taxes and idolize tax cuts, even while they want more/better public services.

The tax-cutting zealots are at it again right now, because the Bush tax cuts are set to expire. These tax cuts first passed in 2001 when the government had a surplus. So while the strategy of cutting revenue was short-sighted at the time, now that we’re in the midst of the worst recession in nearly a century, doing so again seems like insanity. Some experts have estimated that if the tax cuts hadn’t been enacted, the public debt – which conservatives wring their hands over, when not pushing tax cuts for the rich – would be more than $2 trillion lower than it stands now.

Not only did the 2001 tax cuts cost the government a lot of money, but they overwhelmingly benefited the super-rich in our nation. In fact, extending those tax cuts would mean cutting “checks averaging $3 million each to the richest 120,000 people in the country.”

So extending these tax cuts would both starve the Commons of needed revenue and contribute to the huge chasm between our nation’s mini-minority of haves (roughly 2 to 3% of the population) and the super-majority of have-nots. Sadly tax policy has been used to undermine social equity for generations in this country … from the special taxes heaped on Chinese miners that accounted for 25% of California’s taxes during the Gold-Rush, to property tax schemes designed to keep Black schools under-funded in the South.

Even though this kind of anti-Commons tax policy isn’t new, the need to oppose such tax cuts has never been more important. Commons-advocates need to be having honest conversations about why our taxes are both necessary and good -- and why we should be paying more, especially the super-rich.

Privacy and the Commons: Not in My Backyard?

Recently I have had a spate of guests, one of whom has recently started reading this blog. She had read with great interest my post on the Gateless Gated Community because she, too, goes to Fire Island from time to time. She expressed surprise and some judgment on realizing that my backyard is entirely fenced. The fence is a little over 6’ high on three sides and 4 feet high on the side that faces one of my neighbors. Trees, shrubs, and jasmine vines line all the fencing, and so the backyard is very PRIVATE.

My friend felt that a true commons person would not have a fenced yard, or would at least have low picket fences. My fence, she observed, precludes conversation with neighbors, does not allow passers-by to see beautiful flowers and trees, and gives a message of ‘private: this is for people who live here or are invited here by people who live here and it is not for the public.’ “You are a gated family,” she concluded.

Her words made me think about privacy. There is a neighborhood in Toronto where the neighbors took down all the fences between their yards and now children can run from one end of the block to the other, people can see and greet each other, not just next door, but several doors down. This has led to a feeling of real community apparently, and sharing of barbecue grills, lawnmowers, washers and dryers, bikes, etc. A neighborhood in Berkeley has the same arrangement, so the backyards of two city blocks are open, creating a space that is really more of a park than a huge back yard.

Contrast my neighborhood where every house has a high wooden fence around their back yard, so all socializing with neighbors is in the front yards, none of which are fenced. I defended privacy to my friend: we all need privacy to shower, change our clothes, have sex, etc. Sometimes we just want the feeling of being alone and not able to be observed by anyone even if we are just reading the paper. Prisons punish in part by taking away privacy, so that everything is “gateless.” She said she didn’t really think having a gated back yard is such a big deal, but how far would I go with that? Is a gated backyard simply a smaller version of a gated neighborhood? I couldn’t answer, but I know I am not tearing down my fence.

So, am I a hypocrite? No doubt I am, in many ways. I believe in being kind, but I am often snarky. I don’t believe in talking behind people’s backs, but I do on almost a daily basis. But I am also an introvert. The idea of living in a place where going out my back door always meant the possibility of encountering my neighbors (who I like), or always being able to see what they were up to, fills me with dread. In the early morning especially, I take a cup of coffee outside and sit in my garden. I read and write in my journal, and part of the peacefulness I get from that activity is that I do not have to talk with anyone and I am unable to be observed by friends, neighbors or passers-by.

The commons include common sense. And, hoping that I am not just being defensive, I do believe a gated backyard is very different from a gated neighborhood. I admire the people in the neighborhoods I mentioned, and I think those are great places to raise children. For me, however, being a commons activist requires some private time and space: in part to ponder my private fence.

Human Commodification

Neoliberalism, a word much more in use in Europe and Canada than here, is sometimes used interchangeably with capitalism. But in fact, neoliberalism is much more sinister than straight capitalism. Wikipedia says, “Broadly speaking, neoliberalism seeks to transfer control of the economy from public to the private sector, under the belief that it will produce a more efficient government and improve the economic health of the nation.” The American Friends Service Committee’s publication on trade says, “(Neoliberalism is) a view of the world based on the belief that the optimal economic system is achieved by giving free reign to market participants, privatization, minimal restrictions on international trade, and the shrinking of government intervention in the economy.”

Basically, a layperson such as myself would define neoliberalism as the “total commodification of everything.” Neoliberalism represents for me the essence of the opposite of the commons.

The most chilling examples of this are the commodification of human life. In several previous posts Sean and I have talked about immigrants. Immigration is a complicated issue, but one thing about it can be easily understood: when people’s worth is seen as the value of their cheap labor, and when no matter how awful and dangerous border crossings are, huge numbers of people will take the risk and some will make it, it doesn’t matter that some die trying. They are a commodity – a mass production in which some of the commodities will be flawed and not able to be sold, but the value of the others will make up for that loss.

In a ruling August 2 by the federal appeals court, we see that another set of people have become commodities: veterans. A 65-year-old Vietnam veteran, James Turner, was denied Social Security disability benefits because there is still work he could perform, according to the court. Turner is a decorated veteran who suffers from PTSD. An article in the San Francisco Chronicle noted, “One of his tasks during the Vietnam War was to crawl into Viet Cong tunnels with a pistol, knife and flashlight to look for hostile forces. On one occasion he and his platoon discovered the bodies of seven U.S. soldiers who had been skinned alive. Turner told his doctor he thinks about Vietnam every day, he cannot concentrate, he has trouble reading, and he avoids crowds.” He works on a ranch, where, in exchange for lodging, he is able to live alone, repairing fences and doing other odd jobs. He applied for disability because of severe back pain caused by bullet and shrapnel wounds, again from the war.

Turner is a commodity. The court believes he can still work, in other words he can be useful, his labor still has value and he does not deserve further help from a public system. He has to argue that this is not the case, that like an old toaster or a broken chair, he cannot work, and so deserves assistance.

A commons frame says whether he can work or not is not the point. We reject the frame that looks at whether he can be productive or not as the terms under which he would deserve disability payments. Turner is a human being who suffered unbelievable physical and mental pain while serving his country, who continues to suffer from a war that has been over for 40 years, and deserves whatever help and assistance available to him.

(Information for this post was taken from SF Chronicle article, “Denial of Disability Benefits for Vietnam vet upheld” August 3, 2010)

Surviving the recession as a community

With news of the recession, and its devastating effects covering the front pages of the papers, it was nice to see this article on San Jose’s Japantown in the Mercury News. Limiting competition, opening space for neighbors, and fighting over-development has preserved a sense of community and led to a district that is surviving in this economy.

Citizenship & Borders

The New Colossus

Not like the brazen giant of Greek fame
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame,
"Keep, ancient lands, your storied pomp!" cries she
With silent lips. "Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore,
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"

by Emma Lazarus, New York City, 1883

Emma Lazarus, a protégé of Ralph Waldo Emerson, a well known author and poet in her lifetime whose Sephardic Jewish family had been in the United States since the Revolutionary War. A child of privilege, she became an activist for destitute Jews as an adult. Her poem was not engraved on the Statue of Liberty until after her untimely death at 37, and now people are probably more familiar with the poem than the name of its author.

The poem stands in stark contrast to the reality of immigrant welcome to the United States today. I mention Lazarus’ early death and her own lack of name recognition as a remote parallel to this story, which describes the current welcome of immigrants coming into the United States at the border of Arizona and Mexico. These, too, die untimely deaths at all kinds of ages, but probably none are old and most are young. Their names often remain unknown.

A commons frame challenges the meaning and nature of borders and citizenship. We are first and foremost citizens of the world. Our pledge of allegiance is to the earth and the health and well being of all its inhabitants. Social justice organizations need to work for immigrant rights, but also we have to address issues of poverty, unfair trade practices, and working conditions globally. The simple fact is that people ought to be able to visit one another’s countries and feel welcome there. They should earn enough money that if they want to take a trip, they can. They should not have to sneak in, risking arrest, deportation, exploitation and even death. Neither should anyone feel so desperate for work that they are forced to leave their own country to go to another.

Commons activists, in addition to working for immigrants’ rights, must constantly raise the question of citizenship and borders. What do they mean? What are they for? How can our borders be a great open “golden door?”