Economic Scene: Behind Tax Loopholes, Some Worthy Goals

If there is one idea that everybody seems to agree on while peering over the fiscal cliff, it is that we should close the loopholes that riddle the tax code. It is offered as a painless way to raise money, like fixing a leak or ending some unfair privilege.

But there is a problem with this consensus. Many of the things the government promotes with loopholes are truly valuable to lots of Americans. Tax credits and deductions may be murky and convoluted, and perhaps are not the best way to achieve government objectives. But that doesn’t mean they serve no purpose at all.

Consider education. The federal government has helped Americans pay for college since World War II. Lyndon Johnson’s War on Poverty featured the Higher Education Act, which included grants and loans for low-income families. Jimmy Carter’s Middle Income Student Assistance Act vastly increased federal aid by granting access to the middle class.

Right after winning re-election to a second term, Bill Clinton set out to surpass these efforts and provide access to at least two years of higher education to all Americans. Rather than offering federal spending as the Democrats who preceded him did, President Clinton mainly offered tax breaks for higher education: $40 billion worth of them over five years, tucked into the 1997 Taxpayer Relief Act.

It was a strategy for the times. Three years earlier, Republicans had taken control of both chambers of Congress for the first time since the 1950s. “Republicans would vote for any tax reduction that came along without questioning it much,” said Michael Graetz, an expert on taxation at Columbia Law School who worked in the administration of George H. W. Bush. “Democrats found that the only way they could get the kind of spending they wanted was in the form of tax benefits.”

Through the hall of mirrors that is government budgeting, President Clinton’s tax breaks for higher education accomplished two conflicting goals. They amounted to the biggest expansion in federal money for higher education since the G.I. bill. At the same time, they made the government look smaller.

Today, the political tide has turned decidedly against tax breaks. Last week, House Speaker John A. Boehner may have put President Clinton’s higher-education benefits on the chopping block. In exchange for less spending on federal entitlements, he said Republicans could drop their vow of “no new revenues” and let the government raise $800 billion over 10 years by cutting or paring tax breaks.

Though the offer to raise money by closing loopholes has a bipartisan pedigree — based on a plan proposed last year by the Democrat Erskine Bowles and the Republican Alan Simpson, the chairmen of President Obama’s deficit commission — it relies on rhetorical sleight of hand. If tax breaks are equivalent to government spending, eliminating them is equivalent to spending cuts. Mr. Boehner’s offer to do away with tax breaks in exchange for cutting entitlements raises no new revenue. It amounts to cutting spending twice.

Loopholes make up a huge chunk of our government. Known as tax expenditures in the arcane lexicon of budget experts, they have grown a lot since the early 1990s — a consequence of our increasing demand for government programs coupled with our resistance to raising taxes. Last year they added up to more than 7 percent of the nation’s economic output, a sizable figure considering that all federal taxes took some 15 percent of the economy.

Many breaks do the same job as taxing and spending. One of them, for instance, allows employers to pay for employees’ health insurance tax-free. As an alternative, the government might collect the revenue and offer health plans to workers. Rather than offer a mortgage interest deduction, the government could offer grants to help Americans buy homes. A subsidy for the poor could replace the earned-income tax credit.

According to Eric Toder and Donald Marron of the nonpartisan Tax Policy Center, including all the spendinglike exclusions as regular items in the budget increases the size of the federal government by about 4 percent of our gross domestic product. That’s about $600 billion in “hidden” spending through the tax code last year alone.

We may want to trim or eliminate certain tax breaks for specific reasons — because they are poorly targeted or inefficient. The exclusion for employer-provided health insurance — which will cost the government $1 trillion over the next five years, according to the Tax Policy Center — is pretty inefficient as a tool to deliver health care.

It leaves out not only the unemployed, but also 42 percent of working Americans, whose companies don’t provide coverage despite the subsidy. By encouraging unlimited spending on health by high earners, the tax break contributes to making the United States one of the most costly health care systems in the world.

Most federal tax breaks benefit primarily higher-income Americans, who face higher tax rates and therefore get a bigger break from deductions. Rather than strengthen middle-class homeownership, the deduction for mortgage interest mainly helps the affluent buy bigger homes than they otherwise would, leading to higher home prices. Critics argue that the tax break for charitable donations is often merely a subsidy for church donations and college football stadiums.

And some breaks aimed carefully to help low-income and middle-income Americans — like the earned-income tax credit — can pack some unhelpful incentives too. Even President Clinton’s tax breaks for higher education fell short of the goal. They eased the financial burden of college, for sure, but participation was much smaller than the administration had anticipated. A report by the Congressional Research Service found that the program did very little to increase enrollment.

Just because some tax breaks are inefficient and misdirected does not necessarily mean that the goals they serve are unworthy, however. It only means that there may be more effective ways to achieve government objectives.

For instance, President Obama’s fiscal stimulus made some of President Clinton’s higher-education tax credits refundable, so they could help lower-income Americans who owed no income tax and could not benefit from a tax credit.

Ending the tax break for health insurance provided by employers could make sense, for example, when subsidies are available for everybody to be insured. Tax breaks for individual retirement account contributions could be rolled back in exchange for more generous Social Security benefits for the poor.

It makes sense to have an open debate about the purpose, efficacy and cost of our many tax loopholes. But that is not the same thing as simply looking for loopholes to close. It is a debate about the purpose of government and how best to achieve its goals.

E-mail: eporter@nytimes.com;

Twitter: @portereduardo

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Latin music star Jenni Rivera believed dead in plane crash

Fans of Mexican-American singing star Jenni Rivera held a vigil Sunday night in Lynwood

MEXICO CITY — Mexican American singer Jenni Rivera, the "diva de la banda" whose commanding voice burst through the limits of regional Latin music and made her a cross-border sensation and the queen of a business empire, was believed to have died Sunday when the small jet carrying her and members of her entourage crashed in mountainous terrain.

Rivera, a native of Long Beach, was 43. Mexico's ministry of transportation did not confirm her death outright, but it said that she had been aboard the plane and that no one had survived the crash. Six others, including two pilots, also were on board.

"Everything suggests, with the evidence that's been found, that it was the airplane that the singer Jenni Rivera was traveling in," said Gerardo Ruiz Esparza, Mexico's secretary of communications and transportation. Of the crash site, Ruiz said: "Everything is destroyed. Nothing is recognizable."

Word of the accident ricocheted around the entertainment industry, with performer after performer expressing shock and grief. Fans gathered outside Rivera's four-acre estate in Encino.

"She was the Diana Ross of Mexican music," said Gustavo Lopez, an executive vice president at Universal Music Latin Entertainment, an umbrella group that includes Rivera's label. Lopez called Rivera "larger than life" and said that based on ticket sales, she was by far the top-grossing female artist in Mexico.

"Remember her with your heart the way she was," her father, Don Pedro Rivera, told reporters in Spanish on Sunday evening. "She never looked back. She was a beautiful person with the whole world."

Rivera had performed a concert in Monterrey, Mexico, on Saturday night — her standard fare of knee-buckling power ballads, pop-infused interpretations of traditional banda music and dizzying rhinestone costume changes.

At a news conference after the show, Rivera appeared happy and tranquil, pausing at one point to take a call on her cellphone that turned out to be a wrong number. She fielded questions about struggles in her personal life, including her recent separation from husband Esteban Loaiza, a professional baseball player.

"I can't focus on the negative," she said in Spanish. "Because that will defeat you. That will destroy you.... The number of times I have fallen down is the number of times I have gotten up."

Hours later, shortly after 3 a.m., Rivera is believed to have boarded a Learjet 25, which took off under clear skies. The jet headed south, toward Toluca, west of Mexico City; there, Rivera had been scheduled to tape the television show "La Voz" — Mexico's version of "The Voice" — on which she was a judge.

The plane, built in 1969 and registered to a Las Vegas talent management firm, reached 11,000 feet. But 10 minutes and 62 miles into the flight, air traffic controllers lost contact with its pilots, according to Mexican authorities. The jet crashed outside Iturbide, a remote city that straddles one of the few roads bisecting Mexico's Sierra de Arteaga national park.

Wreckage was scattered across several football fields' worth of terrain. An investigation into the cause of the crash was underway, and attempts to identify the remains of the victims had begun.

Rivera, a mother of five and grandmother of two, was believed to have been traveling with her publicist Arturo Rivera, who was not related to her, as well as with her lawyer, hairstylist and makeup artist; reports of their names were not consistent. Their identities were not confirmed by authorities. The pilots were identified as Miguel Perez and Alejandro Torres.

In the world of regional Latin music — norteño, cumbia and ranchera are among the popular niches — Rivera was practically royalty.

Her father was a noted singer of the Mexican storytelling ballads known as corridos. In the 1980s he launched the record label Cintas Acuario. It began as a swap-meet booth and grew into an influential and taste-making independent outfit, fueling the careers of artists such as the late Chalino Sanchez. Jenni Rivera's four brothers were associated with the music industry; her brother Lupillo, in particular, is a huge star in his own right.

Born on July 2, 1969, Rivera initially showed little inclination to join the family business. She worked for a time in real estate. But after a pregnancy and a divorce, she went to work for her father's record label and found her voice, literally and figuratively.

She released her first studio album in 2003, when she was 34.

Her path had not been easy, but rather than running from it, she wrote it into her music — domestic violence; struggles with weight; raising her children alone, or "sin capitan," without a captain. She was known for marathon live shows that left audiences exhilarated and exhausted; by the fifth hour of one recent performance, she was drinking straight from a tequila bottle and launching into a cover of "I Will Survive."

In a witty and sometimes baffling stew of Spanish and English, she sang about her three husbands, about drug traffickers, in tribute to her father, in tribute to her gynecologist.

She became, in a most unlikely way, a feminist hero among Latin women in Mexico and the United States and a powerful player in a genre of music dominated by men and machismo. Regional Mexican music styles had long been seen as limiting to artists, but Rivera shrugged off the labels and brought traditional-laced music — some of which sounded perilously close to polka — to a massive pop audience.

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What Should We Name NASA's New Mars Rover?

With the monumental success of NASA’s Curiosity rover, the agency recently decided to build a younger sibling for the probe out of spare parts.

During a surprise press conference on Dec. 4, NASA associate administrator of science John Grunsfeld announced plans for the new rover that will launch to Mars in 2020. Some in the scientific community reacted by wondering if NASA was completely addicted to Mars, blind to the fact that there are other planets in the solar system. But most are firmly behind the new rover, with folks already rallying around the idea that it will take the first step in a long-held dream of the planetary science community, a Mars sample-return mission.

The public reaction ranged from excitement (“Awesome, another rover!”) to jaded indifference (“Big whoop, another rover.”). Twitter had a field day coming up with silly names for the as-yet nameless rover, many of which were collected under the hashtag #newmarsrovernames. While NASA will no doubt sponsor a contest for young students to christen the probe, that doesn’t mean we can’t have some fun in the meantime.

Here we’ve collected some of the best online responses to NASA’s big announcement. Take a look and vote on which one you think is best below.

Punny Names

Just about everyone and their robot dog suggested a pun, with the number one choice being “Red” as in “Red Rover.” On the other hand, Curiosity is getting a little brother, so what could be more appropriate than Brover? Several folks wanted NASA to embrace the robot’s freedom of sexual expression with the name Bi-Curiosity. And a good number of names played off the idea of curiosity and its feline-murdering ways with The Cat.

Many humorous suggestions centered on the fact that the new rover would be very similar to the old one, with names like Mimicry, Accompany, Supplantation, I’m Curious Too, and the mouthful Revor, Son of Rover, Picker-upper-er of Dirt and Hopefully Other Stuff.

Sarcastic Names

Our favorite online Curiosity doppelganger @SarcasticRover led the charge on curmudgeonly names, writing “How about “Apathy” – young people love that, right?” on Twitter shortly after the announcement.

A great number of the public seemed to favor Redundancy, though Mediocrity, Indifference, and Superfluous made appearances on the internet as well. One Twitter user best summed up these folks, suggesting we call the new rover Meh.

Geeky Names

You can always count on space geeks to be geeky. We got a few mentions of Sagan for the scientist fanboys out there and Serenity for the Joss Whedon acolytes. Stephen Colbert also got a mention with Colbert Rides Again, a possible reference to the man’s namesake treadmill on the International Space Station.

A few people picked up on NASA’s job creator obligations and singular Mars focus, suggesting Job Security and I Should Be On Titan.

Positive Names

Not all suggestions centered on fun and games. The new rover is expected to be just as popular and inspirational as the last and at least one Twitter user threw down a list of beautiful names such as Serendipity, Vitality, Veracity, Agility, Infinity, Audacity, and Tenacity.

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Australian DJs break silence over UK royal prank tragedy

CANBERRA (Reuters) – Two Australian radio announcers who made a prank call to a British hospital treating Prince William‘s pregnant wife Kate broke a three-day silence on Monday to speak of their distress at the apparent suicide of the nurse who took their call.

The 2DayFM Sydney-based announcers, Mel Greig and Michael Christian, said the tragedy had left them “shattered, gutted, heartbroken”.

Greig and fellow presenter and prank mastermind Christian have been in hiding since nurse Jacintha Saldanha‘s death and the subsequent social media outrage at their prank.

Their show, “Hot 30,” has been terminated, the station’s parent company, Southern Cross Austereo (SCA), said in a statement on Monday. SCA also announced a company-wide suspension of prank calls.

Greig told Australian television her first thought when told of Saldanha‘s death was for her family.

“Unfortunately I remember that moment very well, because I haven’t stopped thinking about it since it happened,” she said, amid tears and her voice quavering with emotion. “I remember my first question was ‘was she a mother?’”

“I’ve wanted to just reach out to them and just give them a big hug and say sorry. I hope they’re okay, I really do. I hope they get through this,” said a black-clad Greig when asked about mother of two Saldanha’s children, left grieving their mother’s death with their father Ben Barboza.

Saldanha, 46, was found dead in staff accommodation near London’s King Edward VII hospital on Friday after putting the hoax call through to a colleague who unwittingly disclosed details of Kate’s morning sickness to 2DayFM’s presenters.

British Prime Minister David Cameron said news of the Saldanha’s death was “shocking”.

“I just feel incredibly sorry for her and her family. It’s an absolute tragedy this has happened, and I’m sure everyone will want to reflect on how it was allowed to happen,” he said.

The hospital at which Saldanha worked told the BBC it had not disciplined her for taking the prank call. Police said a post-mortem examination would be conducted on Tuesday.

FIRESTORM

A recording of the call, broadcast repeatedly by the station, rapidly became an internet hit and was reprinted as a transcript in many newspapers.

But news of Saldanha’s death sparked the Internet firestorm, with vitriolic comments towards the DJs on Facebook and Twitter.

Christian said his only wish was that Saldanha’s grief-stricken family received proper support.

“I hope that they get the love, the support, the care that they need, you know,” said Christian, who like Greig struggled to talk about the tragedy.

Both Greig, 30, and Christian were relatively new to the station, with Greig joining in March and Christian having been in the job only a few days before the prank call after a career in regional radio.

Greig said she did not think their prank would work.

“We thought a hundred people before us would’ve tried it. We thought it was such a silly idea and the accents were terrible and not for a second did we expect to speak to Kate, let alone have a conversation with anyone at the hospital. We wanted to be hung up on,” she said.

Christian drew headlines only two weeks before the royal prank call by angering fellow passengers with a harmonica playing stunt aboard pop star Rihanna’s private jet.

SCA, 2Day’s parent company, has received more than 1,000 complaints from Australians over the actions of the popular presenters, who have both been taken off air during an broadcasting watchdog investigation.

“SCA and the hosts of the radio program have also decided that they will not return to the airwaves until further notice,” SCA said in a statement.

Shares in SCA fell 5 percent on Monday after two major Australian companies pulled their advertising with the radio station in protest and other advertising was suspended.

The station said it had tried to contact hospital staff five times over the recordings.

“It is absolutely true to say that we actually did attempt to contact those people on multiple occasions,” said SCA chief executive Rhys Holleran.

“No one could have reasonably foreseen what has happened. I can only say the prank call is not unusual around the world,” he said.

The fallout from the radio stunt has brought back memories in Britain of the death of William’s mother Diana in a Paris car crash in 1997 and threatens to cast a pall over the birth of his and Kate’s first child.

Australia’s Communications Minister Stephen Conroy sought to deflect calls for more media regulation, telling journalists that a looming investigation by Australia’s independent regulator should be allowed to happen without political interference.

(Additional reporting by Mohammed Abbas in London; Editing by Michael Perry)

Celebrity News Headlines – Yahoo! News

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Mind: A Compromise on Defining and Diagnosing Mental Disorders

They plotted a revolution, fell to debating among themselves, and in the end overturned very little except their own expectations.

But the effort itself was a valuable guide for anyone who has received a psychiatric diagnosis, or anyone who might get one.

This month, the American Psychiatric Association announced that its board of trustees had approved the fifth edition of the association’s influential diagnostic manual — the so-called bible of mental disorders — ending more than five years of sometimes acrimonious, and often very public, controversy.

The committee of doctors appointed by the psychiatric association had attempted to execute a paradigm shift, changing how mental disorders are conceived and posting its proposals online for the public to comment. And comment it did: Patient advocacy groups sounded off, objecting to proposed changes in the definitions of depression and Asperger syndrome, among other diagnoses. Outside academic researchers did, too. A few committee members quit in protest.

The final text, which won’t be fully available until publication this spring, has already gotten predictably mixed reviews. “Given the challenges in a field where objective lines are hard to draw, they did a solid job,” said Dr. Michael First, a psychiatrist at Columbia who edited a previous version of the manual and was a consultant on this one.

Others disagreed. “This is the saddest moment in my 45-year career of practicing, studying and teaching psychiatry,” wrote Dr. Allen Frances, the chairman of a previous committee who has been one of the most vocal critics, in a blog post about the new manual, the fifth edition of the Diagnostic and Statistical Manual of Mental Disorders, or DSM5.

Yet many experts inside and outside the process said the final document was not radically different from the previous version, and its lessons more mundane than the rhetoric implied. The status quo is hard to budge, for one. And when changes do happen, they are not necessarily the ones that were intended.

The new manual does extend the reach of psychiatry in some areas, as many critics feared it might. Hoarding is now a mental disorder (previously it was considered a symptom of obsessive-compulsive behavior). “Premenstrual dysphoric disorder,” a severe form of premenstrual syndrome, is also new (it was previously in the appendix).

And binge-eating disorder (also formerly in the appendix), a kind of severe, highly distressing gluttony, is now a full-blown diagnosis. This one by itself could tag millions of people considered healthy, if often overindulgent, with a psychiatric label, some experts said.

But the deeper story is one of compromise. It is most evident in how the committee handled three of the thorniest diagnoses in psychiatry: autism, depression and pediatric bipolar disorder.

The group working on depression declared early on that it wanted to eliminate the so-called bereavement exclusion, which stated that grieving the loss of a loved one should not be considered a clinical disorder, though it shares many of the same outward signs. Grief has always been a normal reaction to death, not a kind of depression.

Advocacy and support groups, such as those representing people who have lost a child, objected furiously to the idea that the bereaved might be given a diagnosis of depression.

“This was just astonishing, that they would eliminate the exclusion, and a distortion of the research on the subject,” said Jerome Wakefield, a professor of social work and psychiatry at New York University, who did not work on the manual.

In the end the committee cut a deal. It eliminated the grief exclusion but added a note in the text, reminding doctors that any significant loss — of a job, a relationship, a home — could cause depressive symptoms and should be carefully investigated.

“It’s like they took it all back,” Dr. Wakefield said. “I don’t like the way it was done — in a footnote — but it’s there.”

The debate over autism was even more furious, and it resulted in a similar rapprochement.

From the outset, the committee intended to tighten the definition of autism and simplify it, eliminating related labels like Asperger syndrome and “pervasive developmental disorder not otherwise specified,” or PDD-NOS. The rate of diagnosis of such conditions has exploded over the past decade, in part due to the vagueness of the definitions, and the committee wanted to draw clearer boundaries.

It proposed a single “autism spectrum disorder” category, with stricter requirements.

Some outside researchers raised concerns. In January one of them, Dr. Fred Volkmar of the Yale School of Medicine, who had quit the committee in protest, presented research suggesting that 45 percent or more of people who currently had an autism or related diagnosis would not have one under the proposed revision.

Autism groups reacted immediately, fearing that the change in the diagnosis would deny services to children and families who need them.

The committee countered with its own study, suggesting that the new definition would exclude about 10 percent of people currently with a diagnosis. And again, the experts took a half step back.

The new, streamlined definition was approved, but with language that took into account a person’s diagnostic history. “It’s explicit that anyone who’s had an Asperger’s or autism or PDD-NOS diagnosis before is now included,” said Catherine Lord, a committee member who worked on the new definition and who is director of the Center for Autism and the Developing Brain in New York. “Essentially everyone gets in.”

Pediatric bipolar disorder posed a different challenge.

In the 1990s and 2000s, psychiatrists began giving aggressive, explosive children a diagnosis of bipolar disorder in increasing numbers. The trend appalled many patient advocates and doctors.

Bipolar disorder, which is characterized by episodes of depression and mania, had previously been an adult problem; now the diagnosis is given to children as young as 2 — along with powerful psychiatric drugs and tranquilizers that also cause rapid weight gain. The committee wanted to stop the trend in its tracks, said experts who were involved.

Most of the children treated for bipolar disorder did not have it, recent research found. The committee settled on an alternative label: “disruptive mood dysregulation disorder,” or D.M.D.D., which describes extreme hostility and outbursts beyond normal tantrums.

“They essentially wanted to have some place for these kids, and D.M.D.D. was all they had in their kit,” said Dr. Gabrielle Carlson, a child psychiatrist at Stony Brook University Medical Center, who provided some outside consultation. “These are mostly kids who have A.D.H.D. or what we would call oppositional defiant disorder, but with this explosive feature. They need help; you can’t wait forever. The question was what to call it, without pretending we know enough to saddle them with a lifelong diagnosis” like bipolar disorder.

D.M.D.D. has its own problems, as many experts were quick to point out. It could be a symptom of an underlying condition, as Dr. Carlson argues. It could “medicalize” frequent temper tantrums. It’s brand new, and no one knows how it will play out in practice.

But it is now in the book — because it was the best solution available, experts inside and outside of the revision process said.

From beginning to end, many experts said, the process of defining psychiatric diagnoses is very much like finding the right one for an individual: it’s a process of negotiation, in many cases.

“That’s one of the take-aways from all this, and I think it’s a good one,” Dr. Carlson said. “A diagnosis is a hypothesis. It’s a start, and you have to start somewhere. But that’s all it is.”

One of the committee’s most ambitious proposals was perhaps the least noticed: a commitment to update the book continually, when there’s good reason to, rather than once every decade or so in a giant heave. That was approved without much fanfare.

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3 killed, 4 wounded in Tulare County shooting

Three people were fatally shot and four others wounded, including two young children, Saturday night on the Tule River Reservation in Tulare County, authorities said.

The suspect, who fled with his two young daughters, was later shot by sheriff’s deputies and taken into custody, according to the Tulare County Sheriff’s Department. The two girls, who were among those shot, were rescued.

The incident began about 7:45 p.m. when the Sheriff’s Department received a 911 call about shots fired in the 100 block of Chimney Road of the Tule River Indian Reservation about 60 miles northeast of Bakersfield, according to a Sheriff’s Department statement.

In a trailer on the property, deputies discovered an adult male and an adult female who had been fatally shot, authorities said. A male juvenile who suffered a gunshot wound was transported to a hospital. 

At a shed on the property, deputies found another male victim who had been fatally shot, authorities said.

The suspect, identified as Hector Celaya, 31, of the Tule River Indian Reservation, fled the scene in a Jeep Cherokee with his two daughters, Alyssa, 8, and Linea, 5, authorities said. An Amber Alert was issued around 11 p.m.

Detectives used Celaya’s cellphone to locate him.

A deputy spotted the vehicle and after failing to make a traffic stop, a slow-speed pursuit began, authorities said.

The suspect eventually stopped and fired his weapon at deputies, who returned fire and struck the suspect twice, seriously wounding him, authorities said.

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New Crowdfunding Site Seeks to Protect Backers of Industrial Design

Entrepreneur Jamie Siminoff wants to build more credibility into crowdfunding — so he’s launching a new platform that takes responsibility for ensuring the viability of new projects.

The crowdfunding process, pioneered by sites like Kickstarter, has had its share of huge successes, as well as failures. The problem, says Siminoff, is that when a venture fails, the funders are left holding the bag. That’s all well and good if you were investing in an artist’s crazy project. It’s much more of a problem if you thought you were pre-ordering a nearly finished gadget.

The biggest culprit for these kinds of issues are physical products. Witness the anger unleashed when Kickstarter darling Pebble announced a further delay alongside underwhelming color choices.

This kind of issue is why Kickstarter recently made some changes, undertaking a combination of education and rule revision. They reminded consumers that Kickstarter is not a store while requiring that all projects disclose risks and challenges, as well as forbidding renderings and concept videos in hardware products.

Siminoff’s answer is Christie Street, a crowdfunding site devoted exclusively to physical products. The promise of Christie Street is that it will vet the projects that it launches carefully, and provide guarantees of progress along the way. The idea is that these protections will make consumers feel safer about the products they’re backing. “We built something that we felt we needed,” he says.

Christie Street, named for the New Jersey road where Edison’s workshop was located, will require that all funders go through an auditing process before they are allowed to go live. Siminoff says that the idea will be to check for basic viability, a kind of sanity test.

“You look at the chips they say they want to use, the size of components that will need to fit in, and so on,” he says, “You check that things conform to what’s available on the market.” From there, they also perform third-party audits of the places where the product will be manufactured, and look at things like production cost and likely shipping time, to ensure that all of this seems realistic.

It’s an all-or-nothing audit. Either the new project meets Christie Street’s approval or it doesn’t. “Our feeling is that the customer that’s buying doesn’t have the sophistication to make the right decision [about whether a design's production targets are reliable],” says Siminoff, “The only way is create a place where you can trust to buy.”

Even after the initial approval, Christie Street stays involved in the project. Successfully funded projects get their money in stages, with Christie Street holding the rest in escrow. Inventors get one-third of the money on funding, one-third of the money once they have a production-ready prototype, and the final one-third when they have a golden prototype, which means they are ready for full manufacturing.

If at any time along the way the project fails, Christie Street will can the project and refund the remaining money to investors.

What constitutes failure? Siminoff ticks off four conditions.

First, the inventor could for whatever reason announce that they couldn’t finish.

Second, if the project ends up more than six months late. “This forces people to be more careful with their delivery dates,” says Siminoff.

Third, if the product falls short of what was promised. “If the pre-production sample is more than 15 percent worse than what was promised, we will not allowed you to manufacture the product,” says Siminoff. (For example, if you promised me 512GB and only delivered 256.)

Last, says Siminoff there are other nuances that they’ll have to work out as the site develops. For example, if a product ends up requiring significant redesign, then Christie Street might end up withholding funds. “Design is a tougher one to quantify,” he says, “but it’s important that the design overall fits what was promised to the customer.”

For the extra cautious, Christie Street goes even further than the refund of remaining money. For 10 percent of their pledge value, backers can insure their entire pledge. If the project goes wrong they’ll get all of it back. Combine that with a pledge from inventors that the product will retail for at least 10 percent more than the pledge amount, and you can either take a 10 percent discount for some additional risk or pay full retail, with a money-back guarantee.

In effect, Christie Street is navigating a space between crowfunding sites like Kickstarter and Indiegogo, which expect backers to handle a lot of their own due diligence while allowing the inventors to be entrepreneurs, and crowdsourcing design sites like Quirky, which handles all of the business elements in-house.

Christie Street is an effort at drawing the lines of trust in a new way, one tied directly to the realities of post-industrial product design. Rather than a blanket ban on renderings and early designs, or a Wild West ‘anything goes’ approach, they instead seeks to tame the parts where production can go really wrong, in the devilish details of prototyping and manufacturing. It leaves questions of whether or not the thing is cool to the wisdom of the crowds, while taking on the question of whether or not the thing is possible.

This is obviously a lot more intervention between middleman and inventor than you’d see on a site like Indigegogo or Kickstarter. Siminoff says that they can still take the same 5 percent cut as their competitors because physical products tend to be involved higher dollar-value projects from the start. “If all goes well, we’ll be doing 10 to 15 live projects a months a year from now,” he says, “We think we can be profitable in the product world.”

“We’re not trying to make it where inventors are just be a name on a product,” says Siminoff, “We still want them to be entrepreneur and build this thing. We just want to make sure that they don’t fail in a way that hurts the customer.”

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Cablevision to raise Internet prices by $5 a month

(Reuters) – Cablevision Systems Corp, the New York-based cable operator, said on Thursday it would raise its Internet prices by $ 5 in January, representing an average hike of 3.2 percent for customers’ total monthly bills.

The company said in a statement that prices for its video and phone services will not be affected and that prices for promotional packages, which generally last one year, will not rise.

But all customers who have Internet service as part of their video or phone package will see prices rise.

Cablevision said it had not raised Internet prices in a decade. It raised video prices in 2011, which saw customer bills rise by 2.88 percent on average.

The company said it has invested $ 140 million in improving its Internet network, deployed more than 50,000 WiFi “hotspots,” and puts no usage caps on its service, unlike some cable competitors.

Canaccord Genuity analyst Tom Eagan downgraded his Cablevision rating from “buy” to “hold” on November 27 and said that Cablevision would lose customers if it were to decide to raise prices not long after Superstorm Sandy.

“Given the massive service outages among its subscribers (after Sandy), we don’t believe the company can raise rates … without incurring material customer churn,” Eagan said.

The cable provider, which is controlled by the Dolan family, said in early November that costs from Sandy, which knocked out service for as many as half its customers, would be substantially higher than its $ 16 million bill from Hurricane Irene in 2011.

Like bigger operators Comcast and Time Warner Cable, Cablevision has been losing customers to rivals such as satellite television provider DirecTV and telephone operator Verizon Communications.

Cablevision shares closed up 2.6 percent, at $ 14.16, on Thursday.

(Reporting By Liana B. Baker; Editing by Steve Orlofsky and Leslie Adler)

TV News Headlines – Yahoo! News

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New Taxes to Take Effect to Fund Health Care Law

WASHINGTON — For more than a year, politicians have been fighting over whether to raise taxes on high-income people. They rarely mention that affluent Americans will soon be hit with new taxes adopted as part of the 2010 health care law.

The new levies, which take effect in January, include an increase in the payroll tax on wages and a tax on investment income, including interest, dividends and capital gains. The Obama administration proposed rules to enforce both last week.

Affluent people are much more likely than low-income people to have health insurance, and now they will, in effect, help pay for coverage for many lower-income families. Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate.

To help finance Medicare, employees and employers each now pay a hospital insurance tax equal to 1.45 percent on all wages. Starting in January, the health care law will require workers to pay an additional tax equal to 0.9 percent of any wages over $200,000 for single taxpayers and $250,000 for married couples filing jointly.

The new taxes on wages and investment income are expected to raise $318 billion over 10 years, or about half of all the new revenue collected under the health care law.

Ruth M. Wimer, a tax lawyer at McDermott Will & Emery, said the taxes came with “a shockingly inequitable marriage penalty.” If a single man and a single woman each earn $200,000, she said, neither would owe any additional Medicare payroll tax. But, she said, if they are married, they would owe $1,350. The extra tax is 0.9 percent of their earnings over the $250,000 threshold.

Since the creation of Social Security in the 1930s, payroll taxes have been levied on the wages of each worker as an individual. The new Medicare payroll is different. It will be imposed on the combined earnings of a married couple.

Employers are required to withhold Social Security and Medicare payroll taxes from wages paid to employees. But employers do not necessarily know how much a worker’s spouse earns and may not withhold enough to cover a couple’s Medicare tax liability. Indeed, the new rules say employers may disregard a spouse’s earnings in calculating how much to withhold.

Workers may thus owe more than the amounts withheld by their employers and may have to make up the difference when they file tax returns in April 2014. If they expect to owe additional tax, the government says, they should make estimated tax payments, starting in April 2013, or ask their employers to increase the amount withheld from each paycheck.

In the Affordable Care Act, the new tax on investment income is called an “unearned income Medicare contribution.” However, the law does not provide for the money to be deposited in a specific trust fund. It is added to the government’s general tax revenues and can be used for education, law enforcement, farm subsidies or other purposes.

Donald B. Marron Jr., the director of the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, said the burden of this tax would be borne by the most affluent taxpayers, with about 85 percent of the revenue coming from 1 percent of taxpayers. By contrast, the biggest potential beneficiaries of the law include people with modest incomes who will receive Medicaid coverage or federal subsidies to buy private insurance.

Wealthy people and their tax advisers are already looking for ways to minimize the impact of the investment tax — for example, by selling stocks and bonds this year to avoid the higher tax rates in 2013.

The new 3.8 percent tax applies to the net investment income of certain high-income taxpayers, those with modified adjusted gross incomes above $200,000 for single taxpayers and $250,000 for couples filing jointly.

David J. Kautter, the director of the Kogod Tax Center at American University, offered this example. In 2013, John earns $160,000, and his wife, Jane, earns $200,000. They have some investments, earn $5,000 in dividends and sell some long-held stock for a gain of $40,000, so their investment income is $45,000. They owe 3.8 percent of that amount, or $1,710, in the new investment tax. And they owe $990 in additional payroll tax.

The new tax on unearned income would come on top of other tax increases that might occur automatically next year if President Obama and Congress cannot reach an agreement in talks on the federal deficit and debt. If Congress does nothing, the tax rate on long-term capital gains, now 15 percent, will rise to 20 percent in January. Dividends will be treated as ordinary income and taxed at a maximum rate of 39.6 percent, up from the current 15 percent rate for most dividends.

Under another provision of the health care law, consumers may find it more difficult to obtain a tax break for medical expenses.

Taxpayers now can take an itemized deduction for unreimbursed medical expenses, to the extent that they exceed 7.5 percent of adjusted gross income. The health care law will increase the threshold for most taxpayers to 10 percent next year. The increase is delayed to 2017 for people 65 and older.

In addition, workers face a new $2,500 limit on the amount they can contribute to flexible spending accounts used to pay medical expenses. Such accounts can benefit workers by allowing them to pay out-of-pocket expenses with pretax money.

Taken together, this provision and the change in the medical expense deduction are expected to raise more than $40 billion of revenue over 10 years.

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As Recovery Inches Ahead, Banks Face a New Reckoning

The nation’s largest banks are facing a fresh torrent of lawsuits asserting that they sold shoddy mortgage securities that imploded during the financial crisis, potentially adding significantly to the tens of billions of dollars the banks have already paid to settle other cases.

Regulators, prosecutors, investors and insurers have filed dozens of new claims against Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and others, related to more than $1 trillion worth of securities backed by residential mortgages.

Estimates of potential costs from these cases vary widely, but some in the banking industry fear they could reach $300 billion if the institutions lose all of the litigation. Depending on the final price tag, the costs could lower profits and slow the economic recovery by weakening the banks’ ability to lend just as the housing market is showing signs of life.

The banks are battling on three fronts: with prosecutors who accuse them of fraud, with regulators who claim that they duped investors into buying bad mortgage securities, and with investors seeking to force them to buy back the soured loans.

“We are at an all-time high for this mortgage litigation,” said Christopher J. Willis, a lawyer with Ballard Spahr.

Efforts by the banks to limit their losses could depend on the outcome of one of the highest-stakes lawsuits to date — the $200 billion case that the Federal Housing Finance Agency, which oversees the housing twins Fannie Mae and Freddie Mac, filed against 17 banks last year, claiming that they duped the mortgage finance giants into buying shaky securities.

Last month, lawyers for some of the nation’s largest banks descended on a federal appeals court in Manhattan to make their case that the agency had waited too long to sue. A favorable ruling could overturn a decision by Judge Denise L. Cote, who is presiding over the litigation and has so far rejected virtually every defense raised by the banks, and would be cheered in bank boardrooms. It could also allow the banks to avoid federal housing regulators’ claims.

At the same time, though, some major banks are hoping to reach a broad settlement with housing agency officials, according to several people with knowledge of the talks. Although the negotiations are at a very tentative stage, the banks are broaching a potential cease-fire.

As the housing market and the nation’s economy slowly recover from the 2008 financial crisis, Wall Street is vulnerable on several fronts, including tighter regulations assembled in the aftermath of the crisis and continuing investigations into possible rigging of a major international interest rate. But the mortgage lawsuits could be the most devastating and expensive, bank analysts say.

“All of Wall Street has essentially refused to deal with the real costs of the litigation that they are up against,” said Christopher Whalen, a senior managing director at Tangent Capital Partners. “The real price tag is terrifying.”

Anticipating painful costs from mortgage litigation, the five major sellers of mortgage-backed securities set aside $22.5 billion as of June 30 just to cushion themselves against demands that they repurchase soured loans from trusts, according to an analysis by Natoma Partners.

But in the most extreme situation, the litigation could empty even more well-stocked reserves and weigh down profits as the banks are forced to pay penance for the subprime housing crisis, according to several senior officials in the industry.

There is no industrywide tally of how much banks have paid since the financial crisis to put the mortgage litigation behind them, but analysts say that future settlements will dwarf the payouts so far. That is because banks, for the most part, have settled only a small fraction of the lawsuits against them.

JPMorgan Chase and Credit Suisse, for example, agreed last month to settle mortgage securities cases with the Securities and Exchange Commission for $417 million, but still face billions of dollars in outstanding claims.

Bank of America is in the most precarious position, analysts say, in part because of its acquisition of the troubled subprime lender Countrywide Financial.

Last year, Bank of America paid $2.5 billion to repurchase troubled mortgages from Fannie Mae and Freddie Mac, and $1.6 billion to Assured Guaranty, which insured the shaky mortgage bonds.

But in October, federal prosecutors in New York accused the bank of perpetrating a fraud through Countrywide by churning out loans at such a fast pace that controls were largely ignored. A settlement in that case could reach well beyond $1 billion because the Justice Department sued the bank under a law that could allow roughly triple the damages incurred by taxpayers.

Bank of America’s attempts to resolve some mortgage litigation with an umbrella settlement have stalled. In June 2011, the bank agreed to pay $8.5 billion to appease investors, including the Federal Reserve Bank of New York and Pimco, that lost billions of dollars when the mortgage securities assembled by the bank went bad. But the settlement is in limbo after being challenged by investors. Kathy D. Patrick, the lawyer representing investors, has said she will set her sights on Morgan Stanley and Wells Fargo next.

Of the more than $1 trillion in troubled mortgage-backed securities remaining, Bank of America has more than $417 billion from Countrywide alone, according to an analysis of lawsuits and company filings. The bank does not disclose the volume of its mortgage litigation reserves.

“We have resolved many Countrywide mortgage-related matters, established large reserves to address these issues and identified a range of possible losses beyond those reserves, which we believe adequately addresses our exposures,” said Lawrence Grayson, a spokesman for Bank of America.

Adding to the legal fracas, the New York attorney general, Eric T. Schneiderman, accused Credit Suisse last month of perpetrating an $11.2 billion fraud by deceiving investors into buying shoddy mortgage-backed securities. According to the complaint, the bank dismissed flaws in the loans packaged into securities even while assuring investors that the quality was sound. The bank disputes the claims.

It is the second time that Mr. Schneiderman — who is also co-chairman of the Residential Mortgage-Backed Securities Working Group, created by President Obama in January — has taken aim at Wall Street for problems related to the subprime mortgage morass. In October, he filed a civil suit in New York State Supreme Court against Bear Stearns & Company, which JPMorgan Chase bought in 2008. The complaint claims that Bear Stearns and its lending unit harmed investors who bought mortgage securities put together from 2005 through 2007. JPMorgan denies the allegations.

Another potentially costly headache for the banks are the demands from a number of private investors who want the banks to buy back securities that violated representations and warranties vouching for the loans.

JPMorgan Chase told investors that as of the second quarter of this year, it was contending with more than $3.5 billion in repurchase demands. In the same quarter, it received more than $1.5 billion in fresh demands. Bank of America reported that as of the second quarter, it was dealing with more than $22 billion in unresolved demands, more than $8 billion of which were received during that quarter.

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