MONEY buying a home

‘Boomerang’ Buyers Set to Surge Back Into Housing Market

Normandy Shores open house for sale, Miami Beach, Florida, 2014
The Miami area is one that could see an influx of 'boomerang' buyers—those who lost a home to foreclosure but are ready to get back in the market. Jeff Greenberg—Alamy

More than 7 million homeowners who suffered a foreclosure or short sale during the housing crisis are poised to become buyers again.

Over the next eight years, nearly 7.3 million Americans who lost their homes in the housing crash will become creditworthy enough to buy again, according to a new analysis.

RealtyTrac, a real estate information company and online marketplace for foreclosed properties, estimates that these “boomerang buyers”—those who suffered a foreclosure or short sale between 2007 and 2014—are rapidly approaching, or already past, the seven-year window “conservatively” needed to repair their credit.

This year, the firm expects, more than 550,000 of these buyers could be in a position to get back into the market. The number of newly creditworthy individuals will then top 1 million between 2016 and 2019 and gradually decline to about 455,000 in 2022.

Screenshot 2015-01-27 10.30.07

RealtyTrac notes that the return of these former homeowners could have a strong effect on housing markets with a particular appeal to the boomerang demographic: areas with “a high percentage of housing units lost to foreclosure but where current home prices are still affordable for median income earners” and a healthy population of Gen Xers and Baby Boomers, “the two generations most likely to be boomerang buyers.”

Based on those criteria, the analysis targets metro areas surrounding Phoenix (with an estimated 348,329 potential boomerang buyers), Miami (322,141), and Detroit (304,501) as the most likely to see an uptick in return buyers.

Chris Pollinger, senior vice president of sales at First Team Real Estate, told RealtyTrac that previously foreclosed Americans shouldn’t rule out another try at homeownership. “The housing crisis certainly hit home the fact that homeownership is not for everyone, but those burned during the crisis should not immediately throw the baby out with the bathwater when it comes to their second chance,” Pollinger said.

Here are the top 10 areas that could see a boom in boomerang buyers:

RealtyTrac

 

MONEY Bitcoin

The First U.S. Bitcoin Exchange Is Now Open

Bitcoin coins in a row
Thomas Trutschel—Alamy

Coinbase's new exchange has regulatory approval in 24 states, including California and New York.

Coinbase, a startup backed by $106 million in investor funding, has opened the first bitcoin exchange inside U.S. borders, the Wall Street Journal reports. The new venture is to the first to let users buy and sell bitcoin with a company based in the United States.

Coinbase has previously found success as one of the more consumer friendly bitcoin wallets and payment platforms. Consumers could buy and sell bitcoins from Coinbase, which would in turn purchase the coins from other exchanges and store them on the customer’s behalf. The company has also partnered with companies like Dell (and MONEY’s parent company, Time Inc.) to facilitate bitcoin purchases by acting as a middleman and converting bitcoins to cash.

Now Coinbase is entering the exchange market as well, and hoping to provide legitimacy and security that foreign competitors have lacked. Mt. Gox, a Japanese exchange that once handled 70% of all bitcoin transactions, lost nearly $500 million in bitcoins in a hacking attack and closed in 2014. In January 2015, UK-based exchange Bitstamp announced it lost nearly $5 million when its wallet system was breached. These and similar incidents have inspired new bitcoin regulatory proposals, a warning from the Consumer Financial Protection Bureau, and the mistrust of non-enthusiasts.

Coinbase has tried to allay these fears by winning government support and advertising its safety features. The company has spent about year working to satisfy regulators, according to the journal, and Coinbase says its customers’ bitcoins are insured against theft.

But regulatory approval may soon become more difficult for bitcoin businesses like Coinbase. New York State Department of Financial Services superintendent Benjamin Lawsky has championed his BitLicense program as a new and more stringent way of regulating bitcoin businesses. That program is still under development and is expected to influence bitcoin regulation nationwide.

Coinbase is not the only company interested in starting a U.S. exchange. Earlier this week, the Winklevoss twins announced their own exchange, called Gemini, that would work with American banks and be “fully regulated.”

So far, the markets have responded favorably to Coinbase’s announcement. Bitcoin’s dollar price is up 7% at press time.

Correction: A previous version of this article reported the Wall Street Journal’s claim that Coinbase had achieved regulatory approval in 24 states, including New York and California. That article has been updated to reflect that Coinbase is working to receive regulatory approval and this article has been updated to reflect that change.

MONEY ridesharing

Uber and Lyft Cap ‘Surge Pricing’ During East Coast Storm

A pink mustache on the dashboard as Bouchaib El Hassani, 31, a Lyft driver, makes his way through midtown.
A pink mustache on the dashboard as Bouchaib El Hassani, 31, a Lyft driver, makes his way through midtown. Bryan Smith—ZUMA Wire/Alamy

Uber won't charge more than 2.8x the normal rates; Lyft will top out at 3x a normal fare.

Worried about getting around during the impending East Coast blizzard? Don’t rule out calling an Uber.

On Monday, ridesharing services Uber and Lyft announced they would be capping their “surge” prices for the coming storm. Lyft will limit prices to three times the normal fare, while Uber will cap prices at 2.8 times the normal rate.

Both companies use demand-based pricing to increase fares when there aren’t enough cars on the road to field requests in a timely fashion. While critics have at times referred to this tactic price gouging, Uber and Lyft defend the practice, saying it encourages drivers to work during the busiest hours—or, as an economist might put it, helps supply keep up with demand.

Lyft has maintained a 200% cap on fares ever since the company launched Prime Time pricing, its version of demand pricing, last year. The one exception was New Years Eve, when the company increased the cap to 400%. Prime Time adds a certain percentage to the overall fare, meaning a 200% Prime Time rate is equivalent to triple the cost of normal ride. On Monday, Lyft sent out an email to New York customers reminding them of the cap and urging both drivers and riders to be safe during the blizzard.

Uber generally does not cap its surge pricing, but after high fares during Hurricane Sandy provoked an outpouring of criticism, the company reached an agreement with New York attorney general Eric Schneiderman to limit demand pricing during “abnormal disruptions of the market” such as emergencies and natural disasters. Uber has since expanded this policy nationwide, and further promised to donate 20% of elevated fares to the Red Cross during times when surge pricing is capped.

Unlike Lyft, Uber does not have a flat cap on its demand pricing. Instead, according to Schneiderman, the cap is “limited to the normal range of prices [Uber] charged in the preceding sixty days. In addition, it will further limit the allowable range of prices by excluding from the cap the three highest prices charged on different days during that period

In an email to users on Monday afternoon, Uber clarified that “prices would not exceed 2.8x the normal fare rate” due to the State of Emergency declared in New York. The company also said all “proceeds” will be donated to the American Red Cross.

In a Monday press conference, New York City Mayor Bill de Blasio appeared to call into question Uber’s agreement with Attorney General Schneiderman when he urged New Yorkers to report any service that raises prices during the storm.

“If you have any evidence—if you happen to take, for example, for-hire vehicles or have any evidence of people taking advantage of this emergency to unfairly and illegally raise the prices of their rides, it is important to call 311 and report it,” said Blasio. “Price gouging in the context of emergency is illegal.” It is unclear if de Blasio was including Uber and Lyft in his definition of “for-hire vehicles.”

The utility of ridesharing services during the weather emergency may also be in doubt for New York City residents. Mayor de Blasio has said all streets will be closed to non-emergency vehicles after 11 p.m. Monday night.

Correction: The original version of this article misstated the Lyft demand pricing plan. Because Prime Time pricing adds a percentage to the overall fare, a 200% cap limits rates to three times the cost of a normal ride.

MONEY crazy promotions

A Famous Writer Wants You to Pay $300,000 for a Book That Will Literally Explode

150123_EM_ExplodingBook
Buena Vista Images—Getty Images

You have to read it through binoculars, though.

Author James Patterson has a…let’s say, creative plan to promote his newest thriller, Private Vegas. Along with a normal version of the book, the best-selling writer is giving out 1,000 advanced copies of his book through a custom iPad app that “self-destructs” after one day. Cute.

But that’s not all. In addition to the “self-destructing” iPad versions, Patterson is also selling one copy of the book that actually does explode in 24 hours. Seriously. Like it has a bomb in it.

As described on the promotion’s website, themosthrillingreadingexperiencemoneycanbuybyjamespatterson.com, this special exploding copy can be yours for the low, low price of $294,038. That money will get you the following:

  • A first-class flight to an undisclosed location (the site suggests said location is a dormant volcano);
  • A two-night stay in a luxurious boutique hotel;
  • A Champagne-stocked bar to provide refreshments during your read;
  • A bomb squad that will hold the book while you read it through gold binoculars engraved with James Patterson’s initials;
  • A five-course dinner with Patterson himself; and
  • An autographed copy of the entire Alex Cross book series.

This all sounds super fake, but the website—and we all know we can trust websites, right?—says the promotion is real: “Very, very expensive, but real.” Patterson asks for “serious inquiries only,” but as a brave journalist willing to do anything for a major story like this one, I filled out the offer form anyway, just to see what would happen.

Patterson’s people, as represented by an email bot, immediately send email promising that I would “hear from [them] soon,” but it’s been 23 minutes since then and I haven’t heard anything. That’s not the kind of punctuality you want from someone trying to sell you a $300,000 time bomb.

So there you go, buyer beware. But before you drop almost three-hundred grand on this novel, consider the fact that Patterson writes his books with an assembly-line-like team of co-authors, so it’s probably not a work of genius, and you can get a whole lot of champaign for less than $300,000.

MONEY Uber

Uber Reveals How Much Its Drivers Really Earn…Sort Of

Uber
Gamma Nine Photography/Uber

Uber says its drivers make $6 more than traditional cab drivers, but the devil is in the details.

Uber has long said its drivers get paid more than traditional cabbies. But do they really?

New data from the ridesharing service itself gives the clearest look into the company’s business—and that of its drivers—than ever before. On Thursday, Uber released two reports: an anonymous survey of 601 Uber drivers and an analysis of the Uber labor market co-authored by Princeton economics professor Alan B. Krueger and Jonathan Hall, Uber’s head of policy research. Together, they provide information on how drivers use Uber, how much they make, and how fast Uber’s business is growing.

The real scoop on wages

The big news in this latest report is wage data. Previously, Uber stated the median driver in New York City was making $90,000 a year in “business income,” but this number was criticized by many because business income doesn’t include costs like gasoline, maintenance, car insurance, health insurance, and, you know, the car itself. Another complaint was that the company wasn’t being clear about how many hours one had to drive in order to make said $90k.

This time around, Uber still isn’t including those costs when calculating drivers’ wages, but it has broken down earnings on a per-hour basis and compared them with government data on how much conventional taxi drivers take home. The results show an Uber driver makes an average of $6 per hour more than the average taxi/chauffeur/limo driver. (The Bureau of Labor Statistics lumps those professions together, which makes for a reasonably fair comparison to Uber’s grouping of commercially licensed Uber Black drivers—a premium service—and lower-paid UberX drivers.)

150122_EM_DriverPayChart
Uber

These numbers are impressive, but Uber acknowledges that its driver-partners “are not reimbursed for driving expenses, such as gasoline, depreciation, or insurance, while employed drivers covered by the OES [Occupational Employment Statistics] data may not have to cover those costs.” So how much do these drivers really make, including expenses? It’s still hard to say. Uber told finance writer Felix Salmon that fuel, gas, maintenance, depreciation, and insurance would add about $15,000 per year in New York City.

That works out to about $7.20 per hour (assuming a 40-hour work week), which would still leave New York Uber drivers ahead, but would seriously cut into Uber’s advantage across the board if costs in other cities are similar. It should also be noted that cab drivers likely share in many of those expenses. But cab drivers may not have to pay for their own vehicle, which drives Uber’s average net hourly wages even lower.

The takeaway from all this? We don’t know much more than before, but it would appear that an Uber driver’s salary is at least on par with that of a normal cab driver, and potentially more.

What kind of jobs is Uber providing?

The good news is that the vast majority of Uber drivers—78%—are satisfied working for the company. But the data also reveal that many drivers see the ride-sharing service as a stopgap measure until they find a better job. The survey results show 32% of drivers said the major reason for partnering with Uber was “to earn money while looking for a steady, full-time job.”

That makes sense considering nearly half of Uber’s drivers have a college degree or higher, well above the 18% of taxi drivers with similar credentials. Indeed, slightly more than half of Uber drivers became inactive one year after joining the service, suggesting they quit or found other work.

That isn’t necessarily a bad thing. One of Uber’s major selling points is that anyone can drive a car to earn a little extra money, and it has clearly succeeded in this regard. But the numbers demonstrate how Uber isn’t providing a career as much as an income supplement or temporary gig: Just 24% of Uber drivers say the company is their only source of personal income, and another 16% say Uber is their largest source of income but not the only one. Meanwhile, nearly 40% of drivers said Uber did not make up a significant source of their wages.

Stunning growth

Ultimately, it’s up to drivers to choose whether Uber makes sense for them, and the results seem to speak for themselves. In the United States, Uber says, more than 160,000 drivers had partnered with the company by the end of 2014, and almost 40,000 new U.S. drivers provided their first trips in December of last year. Thanks to Uber’s new data release, prospective drivers will have more information than ever when making their decision.

Read next: Uber CEO: We’ll Create 50,000 Jobs in Europe This Year

Listen to the most important stories of the day.

MONEY Love and Money

1 in 5 Spouses Commits This Financial Infidelity

money hidden in drawer
Dave Nagel—Getty Images

Hiding something major is rare, but there's a decent change your partner could be keeping financial secrets

Ever question whether your significant other isn’t being entirely forthright with his or her finances? Maybe you should: A new survey from CreditCards.com shows that 6% of Americans keep a bank account or credit card secret from their spouse or partner.

The study, which polled 843 American adults who said they were currently living with a spouse or partner, also found that one in five respondents spent $500 or more on a purchase without their partner knowing.

That number is heavily skewed toward men, with 26% of males reporting a hidden major purchase compared with only 14% of females. But it’s not necessarily because men are more dishonest. A previous study showed they’re simply more likely to make large impulse purchases than women, meaning guys may just be a little freer with funds. At least no one can accuse them of being hypocrites: A surprisingly high number of men—31%—are okay with their partners dropping more than half a grand without notice. Only 18% of women said the same.

When MONEY surveyed more than 1,000 married adults about financial infidelity, we came up with similar results. According to our exclusive Love & Money poll, 22% of husbands and wives have made purchases they didn’t want their partner to know about; 35% of those who hid purchases kept quiet to avoid a lecture.

And what are these secret purchases that have created so much strife? Probably what you expected: For men, it’s mostly hobbies and electronics. For women, it’s clothing, shoes, and gifts for family and friends.

Getting on the same page

So what’s a couple to do? Start by being more transparent about money. In most cases, financial infidelity is caused by nothing more insidious than a failure to communicate. “Any time you’re talking about money in a relationship, it’s all about communication,” says Matt Schulz, a senior analyst at CreditCards.com. He recommends sharing passwords so each partner can view the other’s accounts and have a clear sense of what’s going on financially. Services like Mint.com also allow couples to track each other’s finances without the need to share actual banking credentials.

Manisha Thakor, co-author of Get Financially Naked: How to Talk Money With Your Honey, has another tip for how to increase transparency: Set up your online bank accounts so each person gets alerted when there’s a withdrawal or deposit over a certain amount. Or you can follow the advice of MONEY contributing editor Farnoosh Torabi and set up three separate accounts: his, hers, and ours. “This means you don’t have to tiptoe around each other just to buy something you really want for yourself,” Torabi says. “With your own personal account it’s expected you can splurge on yourself without fear of getting caught.”

No matter what you do, just make sure both parties stay informed about the household’s finances. “If you’re trying to do a budget and living paycheck to paycheck, you need to know what’s going out as well as what’s going in,” Schulz says. “If you can’t do that, all sort of problems come.”

For more on how couples can be richer together, check out all of our Love & Money coverage:
He Says, She Says: When Couples Are out of Sync About Money
When She Makes More: Advice on Playing Fair About Money
Money Match: See How Well Couples Really Know Each Other
QUIZ: Which TV Couple Are You Most Like?

MONEY Inequality

Yes, Oxfam, the Richest 1% Have Most of the Wealth. But That Means Less Than You Think

wealthy man sitting on lawn in front of mansion
Pigeon Productions—Getty Images

It's still bad...but wealth inequality doesn't mean standards of living aren't becoming increasingly equal.

For the past few years, Oxfam, the British anti-poverty organization, has released a series of reports with increasingly dire statements about wealth inequality. This year, it’s back with a new straight-to-the-headlines statistic: The top 1% will control more wealth than the remaining 99% by 2016.

That’s a pretty dire prediction—but the truth is not quite that bad.

First, Oxfam’s prediction is based on trends from 2010 through 2014 that greatly benefited the rich. Right now, the top 1% control “only” 48% of the world’s wealth and it’s unclear whether that number will increase. “Oxfam simply assumes that recent trends (which have been very favorable for the wealthy and very unfavorable for those with limited wealth) will continue,” Jacob Hacker, director of Yale’s Institution for Social and Policy Studies, wrote in an email. “That may be right, but if you look at the report, the longer-term global trend is more ambiguous.”

Second, and more importantly, “wealth” as defined by Oxfam doesn’t mean what most people think it means. That’s because Credit Suisse’s annual Global Wealth Databook, Oxfam’s primary data source, uses so-called net wealth, defined as “marketable value of financial assets plus non-financial assets (principally housing and land) less debts.” By that standard, an American with, say, a high salary and a large mortgage might—if the amount owed on the mortgage is greater than his assets—be counted as less wealthy than a subsistence farmer who doesn’t owe anything.

Consider that U.S. adults under 35 have a negative household savings rate of 2% and you can see how, according to Oxfam, the U.S. has more citizens in the bottom 10% of worldwide wealth than China does. (It places about 7% of Americans in the bottom decile of wealth, and fewer than 0.1% of Chinese citizens.) Only India is said by Oxfam to have more people in this poorest group than the United States. (Finance writer Felix Salmon has helpfully explained this methodological quirk each time Oxfam releases a similar study, and his articles are highly enjoyable reading.)

This doesn’t mean Oxfam’s number is wrong. The one-percenters do indeed control (almost) as much personal wealth as the rest of the population. But as you’ve probably picked up by now, this standard of wealth doesn’t have too much to say about quality of life, and not just in the fuzzy “Can’t Buy Me Love” sort of way. “It’s standard to treat people with more debt than assets as asset poor,” says Hacker. “That doesn’t mean they have low incomes or even, necessarily, a low standard of living.”

In fact, well-being and wealth can be mutually exclusive. Consider the average American worker. Like many people in highly developed countries, she has a relatively high income (on the global scale) and therefore good access to credit. So she tends to borrow against this income to buys things she wouldn’t otherwise be able to afford. If this person had the same access to credit as a Chinese farmer, i.e. almost none, she would be much wealthier in the eyes of Oxfam, but her quality of life might decline as a result.

That’s one reason “assets minus debt” might not be the most instructive way to view global inequality. “Perversely, the low-net-worth citizens in rich countries will appear poorer under Oxfam’s definition of wealth than the low-net-worth citizens in poor countries,” says Gary Burtless, a senior fellow at Brookings specializing in income distribution. “This absurdity points up how misleading it is to rely solely on Oxfam’s wealth definition to judge the progress of relative well-being throughout the world.”

Another issue with Oxfam’s figures is they don’t include what’s known as “public wealth”—the many entitlements citizens of developed nations can depend on. An American with zero net assets might be poor by Oxfam standards, but he becomes a rich man (by international standards) once he turns 65 and starts receiving Social Security benefits.

Public wealth certainly deserves equal billing, says Burtless. “To pretend it doesn’t exist, which is what the Oxfam people are doing, is to disregard all that these wealthy societies have tried to do to protect the living conditions of disabled people, elderly people, and people dependent on someone else,” he argues. “It represents a vast amount of money and it would not surprise me if it completely changes the calculations.”

Oxfam acknowledges these issues but nevertheless defends its approach. “While the measure is indeed imperfect,” an Oxfam spokesperson told MONEY via email, “it’s the best measure capturing the extent of the global wealth disparity at our disposal today.”

Indeed, the “net wealth” approach does capture some of the economic challenges that many middle-class Americans currently face. Using debt to finance one’s lifestyle can be a boon in good years, but leaves one vulnerable in the event of a job loss or other income disruption.

The ability for people with no net assets to live well in rich countries, argues Branko Milanovic, senior scholar at CUNY’s Luxembourg Income Study Center, obscures these sorts of risks.

“This is very important because people who have lots of wealth can ride out a crisis much better,” says Milanovic. Wealth also buys power in a way credit does not. “For political reasons, ownership of wealth is important,” Milanovic argues. Without unleveraged capital, “even if you have a nice life, you won’t be able to have much political influence.”

But while Milanovic makes a compelling case for wealth’s connection to standards of living, others question the focus on numbers that seem to minimize significant progress made toward global equality over the last half century.

“It’s strange that we’re going to emphasize the gap between the world’s richest person and people in lowest income distribution given the fact that the person in the middle has actually seen a faster progress in his or her living standards since the mid to late 1970s than at any point in human history,” says Brookings’ Burtless. “There’s a certain irony.”

MONEY

Why President Obama’s Plan Just Might Fix the Internet

Streaks of traffic on highway interchange
Zoonar GmbH—Alamy

More competition is the only thing that will improve America's internet service, and a "public option" might be the best way to create it.

If you’re sick of your internet service provider, you’re hardly alone. Comcast, the largest service provider in the U.S., has won the Consumerist‘s “Worst Company in America” title twice, most recently in 2014. Time Warner Cable, the giant competitor with which Comcast hopes to merge, made it to the semi-finals. (MONEY was once part of the same company as Time Warner Cable, but that was several corporate spin-offs ago.)

That dissatisfaction is not surprising given that comparative studies consistently show Americans have the worst internet service in the developed world. The Open Technology Institute’s most recent Cost of Connectivity report summarized its findings like this: “The data that we have collected in the past three years demonstrates that the majority of U.S. cities surveyed lag behind their international peers, paying more money for slower Internet access.”

That’s not really where you want to be with something as important as access to the web.

Service providers could make our download speeds faster, but they would need to spend a lot of money upgrading equipment—something they currently seem disinclined to do. The reason, according to many experts? A simple lack of competition. Right now, 28% of Americans have no choice in broadband providers, and that number will shoot up to around 66% if the TimeWarner/Comcast merger is approved. Think your internet bill is too high or service too slow? Too bad. There’s a good (and potentially growing) chance you may have nowhere else to go.

What about those “net neutrality” rules proposed by President Obama in November? They’ll prevent ISPs from flagrantly abusing captive subscribers—by blocking competitors’ sites, for example—but won’t fix the underlying issue. As long as customers don’t have a choice in providers, mediocre or worse service is here to stay. “[The need for] net neutrality is a symptom,” said Vishal Misra, an associate professor of computer science at Columbia University and an expert on the economics of internet service provision. “The real problem is lack of competition and that’s where the solution should be.”

A “public option”

A possible solution may be on the horizon. On Wednesday, President Obama announced that he would ask the FCC to push back on laws in 19 states that prevent cities from building their own municipal broadband networks. He also outlined a number of other initiatives that promote community-supported broadband and help municipalities improve their internet service.

As NPR notes, it is unclear if the FCC has the authority to preempt state regulations. But a renewed focus on a “public option” for internet service could create the kind of competition that would finally drive down prices and improve service. The White House points out that cities with public broadband, like Chattanooga, Tennessee, tend to have much higher speeds than areas with fewer options.

downloadspeeds_12001

 

Two popular ideas for increasing competition are local loop unbundling—forcing existing service providers to lease their infrastructure to competing providers—and municipalities coming together to create their own infrastructure. Columbia’s Misra, who has authored a paper comparing both alternatives, says his research shows that a public network will create the best outcomes.

The reason? Misra argues that local loop unbundling, though better for consumers than no competition at all, relies too much on the main service provider—the one who owns the pipes—to act in a benevolent fashion.

Misra recalls that when internet was delivered via telephone wires, a service still subject to unbundling regulations in the U.S., there were complaints that infrastructure owners were negligent in maintaining parts of their network. Even in the U.K., an unbundling success story, it took a highly aggressive regulator years to stop the nation’s major fiber owner, British Telecom, from keeping other companies off its network with inflated rates and other anti-competitive tactics.

“Last mile unbundling has been tried and there were performance problems,” says Misra. “A publicly owned infrastructure is much better.”

The best of both worlds?

It turns out a public option could also be a boon for private industry. Should a city choose, it could implement its own form of local-loop unbundling by opening its internet infrastructure to private service providers, getting the benefits of unbundling without the harms. That’s something cities like Stockholm, Sweden and Ammon, Idaho have done to great success.

“We build the road, and we let anybody that wants to use them use them,” Bruce Patterson, Ammon’s technology director, told the Institute for Local Self-Reliance when describing his town’s fiber.

Even for those wary of government-run internet service admit public infrastructure could be positive for consumers. Corynne McSherry, a director at EFF specializing in net neutrality, is too concerned about privacy issues to fully endorse a public ISP. But she admits public fiber rented to private companies could keep broadband providers honest. “What that does is create lots of competition, but the government isn’t my service provider,” says McSherry. “That’s when you’ll have better service because people are competing for your business.”

Even with the president’s support, widespread municipal internet is still far away. But the fact that Republicans in states like Tennessee and Iowa have embraced the idea of publicly funded internet should give its supporters hope.

“In today’s world, people need these services in order to survive, much less thrive,” said Janice Bowling, a Republican state senator from Tullahoma, TN, speaking to Watchdog.org about bill that would expand government-owned internet to rural areas. “It has become the electricity of the 21st century to have adequate broadband access.”

 

MONEY Inequality

You’ll Never Guess Which State Has the Nation’s Most Unfair Taxes

Washington state may vote progressive, but its taxes are anything but.

When you think of states that hurt the poor and benefit the rich, ultra-progressive Washington state probably doesn’t spring to mind. And yet, according to a new analysis, Washington’s tax system is the most regressive in the nation, placing a disproportionate burden on those with the lowest incomes.

The study, published by the nonpartisan Institute on Taxation and Economic Policy, finds the poorest 20% of Washington’s population pay almost 17% of their income in taxes, while the richest 1% pay just 2.4% of their earnings. The middle 60% of earners are taxed slightly more than 10% of their income.

While Washington’s regressive tax structure might seem surprising, it shouldn’t be. The institute observes that virtually every state in the union has a tax system that takes “a much greater share of income from low- and middle-income families than from wealthy families,” a policy the report describes as “fundamentally unfair.”

How some tax systems burden the poor

The most well-known tax to most Americans is probably the federal government’s progressive income tax, the “progressive” part meaning it takes a higher percentage from rich than the poor.

However, states actually gain a large portion of their revenues through regressive taxes, meaning those that disproportionately impact people with low income.

Any tax that asks everyone to pay the same amount—sales tax, for example—is regressive, because by taking “equally” from everyone, it takes a higher percentage of a poor person’s income than takes from a richer individual.

Here’s ITEP’s list of the 10 states that take the biggest tax bite from the least affluent residents:

Screenshot 2015-01-14 11.15.00

States in the report’s “Terrible Ten,” such as Washington, rely heavily on sales tax and excise taxes (taxes on specific products, like gasoline or cigarettes) and less on taxes that rise based on income.

Similarly, the institute’s report also reveals that highly regressive states also don’t levy a personal income tax (in the case of Washington, Florida, South Dakota, and Texas), meaning the state must raise more money through regressive consumption and property taxes.

Even states that do tax personal income sometimes do so in a non-progressive fashion. Pennsylvania has an income tax, but applies the same 3.07% rate to everyone. That might seem fair, but $614 means a lot more to a person making $20,000 than $3,070 does to someone making $100,000, even though both amounts are 3.07% of their respective salaries.

Other states on the list do have a progressive rate structure but have so few tax brackets that the outcome is effectively a flat tax. Kansas, for instance, has only two tax brackets, and married couples making $30,000 or more are taxed at the highest rate.

In either case, the the state generally must rely on other regressive taxes to make up for not taxing wealthier individuals a higher proportion of their income.

How to build a fairer system

States with the fairest tax structures follow a completely different path. Oregon, ranked as one of the least regressive states, relies heavily on a very progressive income tax. That allows it lower its dependence on regressive consumption taxes and eliminate sales tax entirely.

These states also have earned income tax credits (EITCs)—essentially tax refunds targeted toward low-income working families that can give certain households a reduced tax burden or, in some cases, a negative tax bill, meaning the government gives them money. The report describes these credits as offsetting the regressive taxes and helping poor families afford necessities.

Screenshot 2015-01-14 12.56.50

Inconsistent improvement

While some states have made their tax systems more fairer in the past year, many have taken a step back. Since 2013, Delaware and Minnesota have increased income tax rates for high earners, while Colorado, Iowa, and others have beefed up their earned income tax credits. At the same time, multiple states have become less progressive by increasing sales tax or implementing a flat income tax rate.

“The bleak reality,” the report concludes,” is that even among the 25 states and the District of Columbia that have taken steps to reduce the working poor’s tax share by enacting state EITCs, most still require their poorest taxpayers to pay a higher effective tax rate than any other income group.”

Read next: How Obamacare Could Make Tax Filing Trickier This Year

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