Divide the company and conquer

Summary

Marketplace Podcast Summary: "Divide the Company and Conquer"
Release Date: December 26, 2024
Host: Kimberly Adams
Host Organization: Marketplace

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1. Understanding the Money Supply: M2 and Its Implications

Timestamp: 01:26 – 04:33

In the episode's opening segment, host Kimberly Adams delves into the Federal Reserve's measurement of the nation's money supply, specifically focusing on the M2 metric. The Federal Reserve recently reported the M2 money supply at $21.5 trillion. Marketplace reporter Justin Ho explains the components of M2, distinguishing it from M1 (which includes highly liquid forms like checking accounts and cash) by adding less liquid assets such as savings accounts.

Ernie Tedeschi from Yale's Budget Lab highlights the significance of tracking M2, noting, “Money supply can be a tool to steer the economy” (03:11). Justin Ho further elaborates on how the Federal Reserve influences the money supply, referencing actions taken during the pandemic, such as purchasing over a trillion dollars in bonds. This influx of money into the banking system, as noted by Nationwide's Chief Economist Kathy Bostjancik, played a role in driving inflation higher by increasing the available funds for loans and consumer spending (04:03).

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2. The 2025 Tax Policy Landscape: Balancing Growth and Deficit

Timestamp: 05:27 – 09:51

As the discussion transitions to federal tax policy, Kimberly Adams introduces economist Ernie Tedeschi from Yale to unpack the upcoming debates. Tedeschi explains that 2025 is pivotal because many provisions from the 2017 Tax Cuts and Jobs Act are set to expire, potentially leading to significant tax increases by 2026 if no new legislation is enacted. He states, “If the administration and Congress doesn't do anything, a lot of us will have tax increases starting in 2026” (05:34).

The episode highlights the ideological split within Congress, despite the Republican majority, between those prioritizing deficit reduction and those advocating for tax cuts and expansions. Tedeschi describes the latter as treating tax reform like “it's Christmas,” emphasizing the high cost of extending existing tax cuts and introducing new measures, with projections ranging from $4 trillion to $10 trillion in expenditures (06:21).

Addressing the deficit, Tedeschi warns of the long-term economic risks posed by large deficits, including higher interest rates that could stifle private sector investment. He emphasizes the need for tax reforms that promote broad economic growth and equitable distribution of benefits, stating, “We want economic growth and we want it to be broadly shared” (09:03).

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3. Corporate Spinoffs: Strategic Divisions for Enhanced Efficiency

Timestamp: 15:27 – 20:05

The podcast shifts focus to a growing trend in the corporate world: the spinoff of business units into separate entities. Kimberly Adams reports on recent examples such as FedEx's plan to spin off its trucking business and Honeywell's exploration of separating its aerospace division. According to Owen Zadar, a professor of economics at Princeton, these spinoffs are often driven by activist investors rather than the companies' C-suite executives (17:50).

Jared Harford from the University of Washington notes that spinoffs can unlock value by allowing each business unit to focus more effectively on its core operations. For instance, General Electric's recent spinoff, GE Vernova, has already seen positive investor reactions, including dividends and stock buybacks, demonstrating potential success (19:15).

Jay Brown of the University of Denver adds that spinoffs are particularly prevalent in industries undergoing rapid change, such as cable TV and package delivery, where separating business units can help companies remain competitive in evolving markets (19:05). As interest rates remain high, spinoffs also offer a strategy to offload debt, improving the parent company's balance sheet and financial health (19:35).

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4. The Rise of Agentic AI: Transforming Business Operations

Timestamp: 20:05 – 23:04

Artificial Intelligence continues to reshape the business landscape, with Marketplace's Matt Levin exploring the concept of agentic AI. This form of AI can perform complex, multi-step tasks autonomously, such as planning trips or conducting detailed business analyses. Owen Zadar illustrates this by describing how AI agents can handle tasks traditionally performed by junior analysts, including drafting professional emails and compiling research from SEC filings (20:46).

Douglas Clinton of Intelligent Alpha shares his firsthand experience, noting, “These agents have been pretty good. Often, I would say they look like reports that I would expect to see from a human analyst” (21:35). The integration of agentic AI promises increased efficiency and accuracy in business operations, potentially reducing human error and freeing up employees to focus on more strategic tasks.

However, Ruchir Puri of IBM cautions that the adoption of AI agents will heavily depend on employee trust. “It's about the trust of the system. Until I come to trust the system,” assures Tina Singh, founder of Bold Helmets, reflecting the broader concern of workforce adaptation to AI technologies (22:23). Ensuring reliability and maintaining human oversight are critical for successful AI integration (22:29).

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5. Property Tax Hikes in Chicago’s South Suburbs: A Strain on Communities

Timestamp: 23:04 – 27:29

In a poignant segment, Marketplace reporter Adora Namigadde examines the significant rise in property taxes in Chicago's south suburbs, where median homeowners have faced nearly 20% increases—the largest in three decades. Glynis James Watson, a recent mover to Harvey, Illinois, shares her shock: “I was flabbergasted” (24:36), after receiving a property tax bill skyrocketing to over $8,000, a sevenfold increase from her initial installment.

Cook County Treasurer Maria Pappez explains that the spike is due to various factors, including recent property reassessments and economic trends such as population decline and reduced commercial investment. Chris Berry from the University of Chicago’s Mansuetto Institute for Urban Innovation highlights the unsustainable nature of rising levies against a shrinking tax base, stating, “The tax base is shrinking, the spending is going up” (25:49).

The burden disproportionately affects black residents, as identified by Berry, with many of the hardest-hit suburbs being predominantly black communities. Beau Kemp of the Southland Development Authority emphasizes the need for balanced growth that supports both legacy residents and newcomers, advocating for strategic commercial investments to stabilize property values and tax revenues (26:56).

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6. IRS Pandemic Recovery Payments: Anticipated Refunds for Eligible Taxpayers

Timestamp: 27:29 – 29:11

Wrapping up the episode, Kimberly Adams informs listeners about the IRS's upcoming disbursement of pandemic-era recovery rebate credits to eligible individuals who did not claim them in 2021. These automatic payments, which could reach up to $1,400 per person, aim to provide financial relief as the year concludes. This effort underscores the ongoing impact of the pandemic on U.S. households and the government's role in facilitating economic recovery.

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Notable Quotes:

• Ernie Tedeschi (Yale's Budget Lab): “Money supply can be a tool to steer the economy.” (03:11)
• Ernie Tedeschi: “If the administration and Congress doesn't do anything, a lot of us will have tax increases starting in 2026.” (05:34)
• Ernie Tedeschi: “We want economic growth and we want it to be broadly shared.” (09:03)
• Glynis James Watson: “I was flabbergasted.” (24:36)
• Douglas Clinton (Intelligent Alpha): “These agents have been pretty good. Often, I would say they look like reports that I would expect to see from a human analyst.” (21:35)
• Chris Berry (Mansuetto Institute for Urban Innovation): “The tax base is shrinking, the spending is going up.” (25:49)

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Conclusion

In this episode of Marketplace, host Kimberly Adams navigates through critical economic issues—from understanding the nuances of the money supply and impending tax policy changes to analyzing corporate spinoffs and the transformative potential of agentic AI. Additionally, the podcast sheds light on the pressing challenges faced by communities due to soaring property taxes. By weaving expert insights and real-life stories, Marketplace provides listeners with a comprehensive overview of the multifaceted economic landscape shaping the United States in 2024.

Transcript

[Tina Singh]

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[Kimberly Adams]

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[Matt Levin]

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[Kimberly Adams]

How much money is floating in this Economy and why it Matters? From American Public Media, this is Marketplace in Washington, D.C. i'm Kimberly Adams in for Kairos doll. It's Thursday, December 26th. Good to have you along here on this program. We spend a lot of time on the major economic reports and data dumps. Think jobs numbers, inflation data, retail spend. But there are plenty of economic releases that don't get as much attention. One of those is the Federal Reserve's tally of the country's money supply. That is how much money is circulating in this economy. It's called the M2, and this afternoon the Fed said that number is sitting at $21.5 trillion. So Marketplace's Justin Ho looked into why we keep tabs on the country's money supply.

[Justin Ho]

The Federal Reserve has a few different tallies of how much money there is floating around. The first is what it calls M1. George perks with the Bespoke Investment Group says you can think of this as money that's really easy to spend, checking.

[Owen Zadar]

Accounts and cash held by the private sector, generally speaking.

[Justin Ho]

Then there's M2, which takes M1 and adds in money that's not quite as easy to pull out and spend, but not too hard either.

[Owen Zadar]

Savings accounts and other liquid savings vehicles that you wouldn't use to transact day to day, but can very easily be transferred into accounts that can then be.

[Justin Ho]

Used to transact There are a couple reasons why tracking M2 is important, says Ernie Tedeschi at Yale's Budget Lab.

[Owen Zadar]

One, it just gives us a sense of the amount of spending potential in the economy at any given time.

[Justin Ho]

And money supply can be a tool to steer the economy. Tedeschi says back in the 70s and early 80s, the Federal Reserve controlled the money supply before shifting to target inflation more directly. But even now, the Federal Reserve can still affect the money supply by buying huge amounts of bonds.

[Owen Zadar]

The Fed creates money, it sends that money out into the broader economy, and it gets bonds back in return.

[Justin Ho]

Early in the pandemic, the Fed bought over a trillion dollars worth of bonds, causing the money supply to pick up quite a bit. Kathy Bostjancik, chief economist at Nationwide, says that money went right into the banking system that then could be used for.

[Kimberly Adams]

Loans and used for eventually businesses or consumers.

[Justin Ho]

Bostjanczyk says that was one factor that helped to push inflation higher, too. To be clear, there were plenty of other factors at play, including low interest rates early in the pandemic.

[Kimberly Adams]

At the same time, supply chains were impaired. So that hurt the supply side of the economy just as you were providing all this money for demand.

[Justin Ho]

Still, Bost Chancek says the amount of money floating around can be an indicator of economic activity and inflation. I'm Justin Ho for Marketplace Wall Street.

[Kimberly Adams]

Today, relatively light trading after the holiday. We'll have the details when we do the number. It is December ages away from April, and so probably the last thing you want to be hearing about is tax season. And yet some people are thinking about it now, namely members of Congress. And even though there will be a Republican majority in Congress come January, we can still expect quite, quite a bit of debate over the shape of tax policy. Here to talk about this is Owen Zadar, a professor of economics at Princeton University. Thanks for joining me.

[Ernie Tedeschi]

Great to be here.

[Kimberly Adams]

So set the table for us. Why is 2025 going to be such a big year for tax policy?

[Ernie Tedeschi]

2025 is going to be quite important because the last major reform in 2017, the tax cuts and Jobs act, set a lot of provisions that were going to expire and at the end of 2025. And so if the administration and Congress doesn't do anything, a lot of us will have tax increases starting in 2026. And so that's a big impetus to try to create new tax legislation that either extends a lot of the cuts that are going to expire or brings back things that were left out and almost happened in recent legislative debates, like the child tax credit or incentives for research and experimentation and research and development in the tax code that a lot of people think might make sense in a tax reform.

[Kimberly Adams]

Republicans control the White House, the House and the Senate, and yet a lot of folks are predicting some pretty big fights over how this is going to play out. How would you break down kind of the different camps when it comes to what they are trying to get out of any new tax law?

[Ernie Tedeschi]

Yeah, it's quite interesting. There's a few different groups in terms of what people want to prioritize. You know, you hear some members who focus on deficit reduction and the debt saying, we can't afford any of this. Why are we talking about this? A second camp is kind of it's Christmas and everyone wants a present. You can understand the appeal of that, where there's trillions of dollars from extending the Tax Cuts and Jobs act, plus a range of promises that were made over the campaign that were also quite costly that add trillions of dollars more to the overall price tag. But still, the big picture on what's going on with 2025 is just how expensive it's going to be, because just extending it, it's going to be something like $4 trillion, adding a lot of things that are promised in the campaign or, you know, depending on who's counting, up to $10 trillion. And the numbers are just staggering. So in the tension between tax reform like it's Christmas and the deficit camp, you know what that ultimate cost will be will kind of tell you something about who won.

[Kimberly Adams]

Let's take that deficit slice on its own, because the U.S. deficit is upwards of $1.8 trillion. And a lot of Republicans, or I should say some Republicans, are claiming that tax cuts pay for themselves and won't add to that figure. Many economists respectfully disagree with that. What role do you see the deficit playing in this debate over what happens with taxes moving forward?

[Ernie Tedeschi]

I think it's a real key player in the debate going forward. We're in a much worse fiscal position than we have been in prior discussions in 2017, for example. So investment is a key driver of growth. And if we have big deficits, it's going to be hard to encourage a lot of private sector investment if the government is paying high interest rates, because we have to do that to finance a really big debt. So I think the deficit camp is worried about, you know, our fiscal health and, you know, overall what the effects on growth will be if we treat this tax reform like it's Christmas.

[Kimberly Adams]

How do you see members of Congress kind of prioritizing? What should be the most important consideration when shaping tax policy? Is it to stimulate growth in the economy? Is it to reduce the deficit? Is it to kind of, you know, reward people who voted for them and interests that support them?

[Ernie Tedeschi]

I think all of those are reasonable things. From a policy point of view. The goal is to have a big pie with equitable slices. We want economic growth and we want it to be broadly shared. Hopefully representatives recognize that a thriving economy that's doing a lot of investment and generating growing wages for people at the middle and the bottom of the income distribution is really what will pay off most. And so I hope that we see reforms oriented towards growth more so than things that pay off narrow constituencies, even if they are basically just adding to the deficit and not really adding much to the overall well being of America.

[Kimberly Adams]

Owen Zadar is a professor of economics at Princeton University. Thank you so very much.

[Ernie Tedeschi]

Thank you very much.

[Kimberly Adams]

If you're into an intensive sport like biking or hockey or rollerblading, head protection is usually highly recommended. And putting on a helmet can be more complicated than you might think. That brings us to our latest installment of our series, My Economy.

[Tina Singh]

My name is Tina Singh. I'm an occupational therapist and the founder of Bold Helmets and I'm from Brampton, Ontario. I became an occupational therapist, I think, in 2007. I have been practicing in the area of head and brain injury ever since. I did a lot of work in the community and got to know people and their injuries and the impact of the head injuries on their lives. This idea of making helmets that would work for kids like mine really actually just came from my real life experience. I'm the mom of three kids. They are now 12, 11 and 9. But when my oldest son was 3 years old, he was a kid who was really quick on a two wheeled bike, no training wheels whipping down the street and giving me a heart attack. And so when I tried to find a helmet that would work for him, I couldn't find anything because we are a Canadian sick family and my kids have long uncut hair that they keep in a top Knot. And so, because of that, the traditional helmets just didn't fit. And so a few years ago, I decided to take action to create a product that would work for kids like mine. My husband and I, we sat back and thought about what this helmet would look like. We looked at safety standards and tried to figure out, would a helmet that was modified in the way that we were thinking actually work? And when we discovered that, yeah, there's a pretty good chance we can make this work, that's when we found a design engineer who believed in our vision and what we were doing. When I shared this idea with my kids, they were excited. They were intrigued. They were thinking, like, look how easy this is. It wasn't even a thought they could put on a helmet with without having to think twice about it. Whereas in the past, it was always something in the back of my mind, like, I gotta make sure I tie their hair back in a way that they're not used to, that they don't like. And so the ease of it, I think, was the most surprising thing for them, sharing this with other parents in my community, other parents who are part of the Sikh faith who have struggled with the same issue. Many of them were relieved, like, oh, my goodness, I can't believe it's taken so long, and I can't believe this actually fits. So I think it's that relief they expressed to me, I think, has been the most common thing that I've seen. I really want to focus on children because I think that's where we can create the greatest impact, and we can help kids participate in sport and build more equity into the systems we have in place.

[Kimberly Adams]

Tina Singh, the founder of Bold Helmets in Brampton, Ontario. We can't do this series without you. So tell us what's happening in your economy. If you started a new business or changed careers, we want to hear from [e-mail] MyEconomy Coming up, most people don't.

[Tina Singh]

Know that they paid to 14 different governments.

[Kimberly Adams]

Let's break that down. But first, let's break down the numbers. The Dow Jones industrial average gained 28 points, less than a tenth of a percent, to finish at 43,325. The NASDAQ fell 10 points, again, less than a tenth of a% to end at 20,020. And the S&P 500 slid 2 points. You guessed it, less than a tenth of a Percent to close at 60:37. The Labor Department reported today that continuing claims for U.S. unemployment benefits hit 1.91 million in the week that ended December 14th. That's the highest figure in more than three years, and it's a sign that it's taking longer for jobless people to find work. Bond prices fell. The Yield on the 10 year T note remained at 4.5 and you're listening.

[Matt Levin]

To Marketplace when you think about businesses growing their sales beyond forecasts. Sure you think about a product with demand, a focused brand and influence driven marketing. But an often overlooked secret is the businesses behind the business making selling and for shoppers buying simple for millions of businesses. That business is Shopify. Nobody does selling better than Shopify, home of the number one checkout on the planet. And the not so secret secret with shop pay that boosts conversions up to 50%, meaning way less carts going abandoned and way more sales going. So if you're into growing your business, your commerce platform better be ready to sell wherever your customers are scrolling or strolling on the web, in your store, in their feed and everywhere in between. Businesses that sell more sell on Shopify. Sign up for your $1 per month trial period at shopify.com marketplace all lowercase go to shopify.com marketplace to upgrade your selling today. Shopify.com marketplace There are over 1.5 million.

[Kimberly Adams]

Nonprofit organizations in the US and millions more around the world. How do you know which ones can make the biggest impact with your donation? GiveWell was founded to help donors with that exact question. They pour over independent studies and charity data to help donors direct their funds to evidence backed organizations that are saving and improving lives. GiveWell wants as many donors as possible to make informed decisions about high impact giving. You can find all their research and recommendations on their site for free. You can make tax deductible donations to their recommended funds and charities. And GiveWell doesn't take a cut. If you've never used GiveWell to donate, you can have your donation match up to $100 before the end of the year or as long as matching funds last. To claim your match, go to givewell.org and pick podcast and enter Marketplace at the checkout. Make sure they know that you heard about GiveWell from Marketplace to get your donation matched. Again, that's givewell.org to donate or find out more. This is Marketplace. I'm Kimberly Adams. There have been a couple of business trends this year. Some big obvious ones like the increasing use of AI, which we'll get to in a minute. But there have been some other trends in the corporate world you might not have noticed as trends like the increase in spinoffs breaking up bigger companies into smaller, more focused versions FedEx announced plans last week to spin its trucking business off into its own publicly traded entity. Honeywell is exploring doing the same with its aerospace business. And you might remember earlier this year, both Comcast and General Electric announced their own self divisions into new, separate companies. As Marketplace's Henry Epp reports, more companies are finding reasons to follow this path, with some investors egging them on.

[Owen Zadar]

It's not necessarily the folks in the C suite who are pushing to break apart their businesses, says nel Minow at ValueEdge Advisors.

[Kimberly Adams]

CEOs love to buy new stuff. I mean, it's a lot more fun than just figuring out a way to cut costs or develop new products.

[Owen Zadar]

Instead, it's often activist investors who push for spinoffs, she says.

[Kimberly Adams]

Activists who are on the outside who are looking at the balance sheet can see that, as they say on Sesame street, one of these things is not like the other and it doesn't belong.

[Owen Zadar]

So say a company runs a freight trucking business, but also a package delivery business and a printing business, which kind of doesn't belong. Jared Harford is at the University of Washington.

[Kimberly Adams]

The company may actually be more valuable.

[Tina Singh]

If it wasn't bundled with those assets.

[Owen Zadar]

A lot of this is happening in industries that are changing quickly, says Jay Brown at the University of Denver. Cable TV and package delivery, for instance. They're evolving and they're reconfiguring from what they were before. And so people are trying to reallocate their assets in a way that will allow them to compete more effectively. But it's a guess, right? And those guesses, he says, could prove to be wrong. Not every spinoff works out, but a recent one really has worked so far. General Electrics GE Vernova, the new name of the former conglomerate's energy business, just announced an investor dividend and stock buyback, and its competitors have noticed, says Asif Surya, who runs a website and newsletter called Inside Arbitrage.

[Matt Levin]

They saw that playbook work and they said this is a company in the.

[Ernie Tedeschi]

Same space in industrials and we could.

[Adora Namigadde]

Potentially try to do the same thing.

[Owen Zadar]

One other reason companies might want to pursue a spinoff now analysts expect interest rates to remain higher for longer, meaning the cost of debt will stay higher. Surya says spinoffs are an excellent way.

[Tina Singh]

Of offloading debt, especially to the spun.

[Owen Zadar]

Off company, which can make the balance sheet of the parent company, the one not getting spun off, look a whole lot better. I'm Henry Epp for Marketplace.

[Kimberly Adams]

Just as companies business models evolve, so too does technology. Along with the fast changing terminology, businesses use to keep up with the latest developments. Take the field of artificial intelligence, which has its own rapidly expanding vocabulary. For example, AGI, or artificial general intelligence, which is basically a robot smarter than any of us humans. Or there's hyperscalers, a term which refers to big tech firms rich enough to create their own AI. But if you had to pick the most important AI buzzword for next year, agentic AI may very well be the winner. Marketplace's Matt Levin has more.

[Owen Zadar]

Let's say you're the head of an investment firm like Doug Clinton at Intelligent Alpha. In prehistoric times, like last year, you might tell a junior analyst, hey there, Billy, can you go through the SEC filings of Company X, figure out the risks of their business, and then email them some questions? Now, though, in 2024, an AI agent can do a lot of that on its own, and its emails will probably have fewer grammatical errors than Billy's.

[Justin Ho]

So the email says, could you provide.

[Kimberly Adams]

Me some detail on specific initiatives Company X is undertaking to attract and retain a more diverse consumer base?

[Owen Zadar]

That's a real email an AI agent wrote and sent to a real company. For Clinton, he's withholding the real company's name.

[Matt Levin]

I think these agents have been pretty good. Often, I would say they look like.

[Kimberly Adams]

Reports that I would expect to see from a human analyst.

[Owen Zadar]

With AI chatbots like ChatGPT, you can say, plan me a trip to Ireland for a budget conscious family of four and it'll give you a hypothetical agenda with AI agents. You say, plan that trip to Ireland and it'll go ahead and book the discount flights and Guinness Brewery tour for you. Alkesh Shah is at bank of America.

[Matt Levin]

You're creating software that can actually do.

[Justin Ho]

Things in the real world, multiple steps.

[Kimberly Adams]

Where you don't actually have to write all of the code and give it.

[Matt Levin]

Exact directions on what to do.

[Owen Zadar]

Businesses are salivating over agentic AI. Ruchir Puri at IBM says the speed at which AI agents are adopted within a company will depend partly on how employees react to them.

[Tina Singh]

It's about the trust of the system. Until I come to trust the system.

[Matt Levin]

Totally, I'm still in the driving seat. I'm driving.

[Owen Zadar]

Puri is talking about employees trusting that the robot won't make a mistake, not necessarily trusting that the robot won't, you know, just replace you. I'm Matt Levin for Marketplace.

[Kimberly Adams]

Earlier in the show, we were talking about what's coming up in terms of federal tax policy. But of course, federal taxes aren't the only ones we pay. There are state and local taxes and one particular pain point for a lot of folks, these property taxes. That's the case in Chicago's south suburbs, where property tax bills jumped nearly 20% for the median homeowner there. That's the largest increase in three decades. WBEZ's Adora Nami Gade reports.

[Adora Namigadde]

Glynis James Watson moved from the affluent northern suburb of Evanston, Illinois to the less well off south suburb of Harvey in 2021. She had just graduated from seminary and hoped the move would lead to a pastor position.

[Tina Singh]

I felt a call to move down here. I'll put it like that.

[Adora Namigadde]

The job didn't pan out, but she's still glad she moved. The south suburbs are an underinvested portion of the Chicago area. She lives in Harvey, a city sprinkled with a few abandoned buildings from an industrial past. But in her neighborhood, she has a strong sense of community. James Watson likes her brown brick house and she has great neighbors.

[Kimberly Adams]

Everything was going well and payments were well within my means, and so I had no issues up until recently.

[Adora Namigadde]

What happened recently is James Watson got her second tax bill installment. The increase was even more than the median for the area. Her bill was more than $8,000, some seven times what she paid in the first installment.

[Kimberly Adams]

I was, I was flabbergasted.

[Adora Namigadde]

Cook County Treasurer Maria Pappez says this is a common reaction to the latest property tax installment. And the reasons for the sudden spike are complicated.

[Tina Singh]

Most people don't know that they paid to 14 different governments. They have no idea.

[Adora Namigadde]

Each jurisdiction bills a little differently. And homes in the south suburbs were recently reassessed. Plus, there are a couple of economic trends at play here. Residents are tending to move out, and commercial investment in these neighborhoods has decreased over time. That means property taxes are rising when property values are not. The thing is, these governments still have to pay the bills. That's why levies exist.

[Justin Ho]

The levy is just another word for.

[Kimberly Adams]

The total tax bill of a jurisdiction.

[Justin Ho]

That is, how much property taxes does.

[Kimberly Adams]

A particular jurisdiction collect?

[Adora Namigadde]

Chris Berry is head of the Mansuetto Institute for Urban Innovation at the University of Chicago. He says, think of a levy as a community bill that's divided among homeowners in a jurisdiction. The more people who live there, the more people amongst whom to divide the load. But when some people move out, those who remain pay more. Berry says this situation is untenable.

[Justin Ho]

The tax base is shrinking, the spending is going up, and those two things cannot continue to happen simultaneously for very long before the jurisdiction goes bankrupt or people move out.

[Adora Namigadde]

The problem most severely impacts black residents in the south suburbs. Of the 15 suburbs with the largest property tax hikes, the vast majority are home to mostly black residents like James Watson. In these suburbs, homeowners saw their property taxes rise at least 30%. Barry says elected officials and residents do have the power to turn this around.

[Justin Ho]

In the short run.

[Matt Levin]

It's the job of the elected officials.

[Justin Ho]

Who determine the levies, so each of the jurisdictions determines its own levy. I would say in the long run.

[Matt Levin]

It'S really the job of the voters.

[Justin Ho]

To determine this if they are unhappy with these trends.

[Adora Namigadde]

Still, some of the reasons that taxes are higher, not enough new residents, lack of commercial investment that adds up to opportunities for this part of Chicago. Beau Kemp runs the Southland Development Authority, a nonprofit. He says developers and government shouldn't overlook Chicago's south suburbs, the western suburbs, the northern suburbs already built.

[Kimberly Adams]

And so we present ourselves as the best opportunity for that kind of growth and growth that can be done in a way that maintains the legacy residents who've been here for 10, 20, 30.

[Adora Namigadde]

40 years, while also, he says, making room for newcomers to move in. In the south suburbs of Chicago. I'm Adora Namigadde for Marketplace.

[Kimberly Adams]

This final note on the way out today, sticking with the topic of taxes. While some people are surprised by an unexpected jump in what they owe about a million, taxpayers are in the opposite situation. The IRS announced it's going to be sending out payments within the next few weeks to people who were eligible for a pandemic era recovery rebate credit but didn't claim it when they could back in 2021. The payments will be automatic via check or direct deposit and could be as much as $1,400 per person. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher and Stephanie Seek are the Marketplace editing staff. Amir Babawi is the managing editor and I'm Kimberly Adams. We'll be back tomorrow. This is apm.

[Adora Namigadde]

Hey, grown ups.

[Kimberly Adams]

Need some holiday gift ideas for the.

[Adora Namigadde]

Curious kids in your life?

[Kimberly Adams]

Give them a Smarty Pass subscription.

[Adora Namigadde]

It's a ticket to award winning podcast for kids about science, history, debate and more. Smarty Pass was named one of the top gifts for kids this year by.

[Kimberly Adams]

The New York Times Gift Guide.

[Adora Namigadde]

With access to shows like Brains on smashboom, Best and Forever Ago, there's a.

[Kimberly Adams]

Little something for everyone.

[Adora Namigadde]

For just $45 a year, you get ad, free episodes and exclusive bonus content. Head to smartypass.org to sign up.

[Kimberly Adams]

Your kids will thank you.