Divide the company and conquer

Summary

Marketplace Podcast Summary

Episode Title: Divide the Company and Conquer
Release Date: December 26, 2024
Host: Kimberly Adams
Hosted by: Marketplace

---

1. Understanding the Federal Money Supply

Overview:
In this segment, Kimberly Adams discusses the Federal Reserve's measurement of the United States' money supply, focusing on the M2 metric, which currently stands at $21 trillion. Justin Ho delves into the distinctions between M1 and M2, explaining their significance in gauging economic activity and inflation.

Key Points:

• Money Supply Metrics:

  • M1: Represents highly liquid assets like checking accounts and cash.
  • M2: Includes M1 plus savings accounts and other liquid savings vehicles, providing a broader sense of spending potential in the economy.

• Economic Implications:

  • Tracking M2 helps understand the economy's spending capacity and serves as a tool for the Federal Reserve to influence economic conditions.
  • Historical context: In the 1970s and early 1980s, the Fed controlled the money supply directly but has since shifted focus toward targeting inflation. However, actions like large-scale bond purchases still impact M2.

• Impact of the Pandemic:

  • The Federal Reserve's purchase of over a trillion dollars in bonds during the pandemic significantly increased the money supply.
  • Kathy Bostjancik of Nationwide notes that this influx led to more loans and higher inflation, amidst other factors like low interest rates and disrupted supply chains.

Notable Quotes:

• Ernie Tedeschi, Yale's Budget Lab:
  “Money supply can be a tool to steer the economy.” (02:10)

• Kathy Bostjancik, Nationwide:
  “The amount of money floating around can be an indicator of economic activity and inflation.” (03:09)

---

2. The Future of Federal Tax Policy

Overview:
Kimberly Adams hosts an insightful discussion with Owen Zadar, a Princeton University economics professor, about the impending tax policy debates set to unfold in 2025. The conversation centers on the expiration of the Tax Cuts and Jobs Act of 2017 and the potential repercussions if new legislation is not enacted.

Key Points:

• Tax Cuts and Jobs Act:
  Many provisions are set to expire at the end of 2025, potentially leading to significant tax increases by 2026 unless extended or modified.

• Diverging Congressional Priorities:

  • Deficit Reduction Advocates: Emphasize the importance of controlling the national deficit, currently over $1.8 trillion, and caution against costly tax extensions that may exacerbate fiscal issues.
  • Tax Reform Proponents: Advocate for extending tax cuts and introducing new incentives, such as child tax credits and research and development deductions, to stimulate economic growth.

• Economic and Fiscal Impact:
  Extending current tax provisions could add between $4 trillion to $10 trillion to the deficit, highlighting the substantial fiscal challenges ahead.

Notable Quotes:

• Owen Zadar:
  “2025 is going to be quite important because the last major reform in 2017 set a lot of provisions that were going to expire.” (04:40)

• Zadar on Deficit Concerns:
  “If we have big deficits, it's going to be hard to encourage a lot of private sector investment.” (07:34)

---

3. Corporate Restructuring through Spinoffs

Overview:
Henry Epp reports on the growing trend of large corporations breaking into smaller, more focused entities. This strategy, often driven by activist investors, aims to enhance company value and operational efficiency.

Key Points:

• Recent Examples of Spinoffs:

  • FedEx: Plans to spin off its trucking business into a publicly traded entity.
  • Honeywell: Exploring a similar strategy for its aerospace division.

• Driver Behind Spinoffs:

  • Activist Investors: Play a pivotal role, urging companies to separate distinct business units to unlock value.
  • Operational Efficiency: By divesting unrelated segments, companies can focus on core competencies and improve financial health.

• Economic Climate Influence:
  High-interest rates make debt more expensive, encouraging companies to offload debt through spinoffs to enhance parent company balance sheets.

• Success Stories and Risks:

  • GE Vernova: A successful spinoff that has implemented investor dividends and stock buybacks, garnering positive market attention.
  • Uncertainty: Not all spinoffs succeed, as market conditions and strategic execution can vary significantly.

Notable Quotes:

• Nel Minow, ValueEdge Advisors:
  “It's not necessarily the folks in the C-suite who are pushing to break apart their businesses.” (17:13)

• Asif Surya, Inside Arbitrage:
  “The numbers are just staggering. So in the tension between tax reform like it's Christmas and the deficit camp, what that ultimate cost will be will kind of tell you something about who won.” (17:33)

---

4. Advances in Artificial Intelligence: The Rise of Agentic AI

Overview:
Matt Levin explores the burgeoning field of agentic AI, which represents a significant leap in artificial intelligence capabilities. This technology allows AI agents to perform complex, multi-step tasks autonomously, transforming various business operations.

Key Points:

• Definition of Agentic AI:
  AI systems that can execute tasks independently, such as drafting emails, planning itineraries, and even booking services without human intervention.

• Practical Applications:

  • Investment Firms: AI agents can analyze SEC filings, assess business risks, and communicate with companies more efficiently than junior analysts.
  • Everyday Use: Individuals can use AI to plan trips, manage schedules, and handle routine tasks seamlessly.

• Business Implications:
  Companies are eager to adopt agentic AI to enhance productivity and streamline operations. However, employee trust in these systems is crucial for successful integration.

• Challenges and Considerations:
  Building trust in AI systems involves ensuring reliability and minimizing errors to prevent mistrust and resistance from the workforce.

Notable Quotes:

• Al Kesh Shah, Bank of America:
  “Businesses are salivating over agentic AI.” (20:36)

• Ruchir Puri, IBM:
  “The speed at which AI agents are adopted within a company will depend partly on how employees react to them.” (21:47)

---

5. Surge in Property Taxes in Chicago’s South Suburbs

Overview:
Adora Nami Gade from WBEZ reports on the significant increase in property taxes affecting homeowners in Chicago's south suburbs. This spike, averaging nearly 20%, marks the largest rise in three decades and disproportionately impacts predominantly Black communities.

Key Points:

• Case Study – Glynis James Watson:
  Experienced a drastic increase in her property tax bill, raising from manageable payments to a second installment exceeding $8,000, a sevenfold increase.

• Underlying Causes:

  • Multiple Tax Jurisdictions: Homeowners unknowingly pay taxes to 14 different governments, complicating billing and financial planning.
  • Economic Trends: Declining population as residents move out and reduced commercial investment lead to rising property taxes despite stagnant or falling property values.

• Impact on Communities:
  The tax burden is particularly heavy on Black residents in the south suburbs, exacerbating economic disparities and threatening community stability.

• Potential Solutions:

  • Policy Intervention: Elected officials can adjust levies and engage voters to address the unsustainable tax burdens.
  • Economic Development: Encouraging commercial investment and population growth can broaden the tax base and mitigate rising taxes.

Notable Quotes:

• Chris Berry, Mansuetto Institute for Urban Innovation:
  “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.” (25:12)

• Beau Kemp, Southland Development Authority:
  “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.” (26:17)

---

6. IRS Pandemic Recovery Payments

Overview:
In a concluding segment, Kimberly Adams informs listeners about the IRS's upcoming distribution of Pandemic Era Recovery Rebate Credits. Eligible individuals who did not claim these credits in 2021 will receive automatic payments of up to $1,400.

Key Points:

• Automatic Payments:
  Recipients will receive the funds via check or direct deposit without needing to take additional action.

• Eligibility:
  Targets individuals who qualified for the recovery rebate credits during the pandemic but did not claim them.

• Expected Impact:
  The payments aim to provide financial relief to eligible taxpayers, potentially boosting consumer spending and economic recovery.

Notable Quotes:

• Kimberly Adams:
  “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.” (27:33)

---

Closing Remarks

Kimberly Adams wraps up the episode by highlighting the diverse range of topics covered, from economic indicators and tax policy to corporate strategies and advancements in AI. She emphasizes the importance of understanding these complex issues in shaping both personal finances and broader economic landscapes.

---

Notable Listener Testimonials:

• Julie from Centennial, Colorado:
  “Kai and the gang keep me awake and interested for my 30-minute drive.” (15:53)

• Nicole from Camphill, Pennsylvania:
  “Listening is part of my daily routine. I love the way they make the content digestible and relatable.” (28:02)

---

Conclusion:
This episode of "Marketplace" offers a comprehensive exploration of current economic trends, policy debates, and technological advancements. Through expert interviews and real-world examples, listeners gain valuable insights into the factors shaping the U.S. economy and their personal financial well-being.

---

For more information and to support Marketplace, visit marketplace.org.

Transcript

[Sponsor Representative]

Invest Puerto Rico supports this Marketplace podcast what's next in innovation? That's not the right question. It's where Puerto Rico more than just a tropical paradise. It's innovations paradise, where startups and global players coexist in a vast and vibrant ecosystem where talent runs deep, highly skilled and bilingual.

[Tina Singh]

Plus, the island offers the most competitive.

[Sponsor Representative]

Tax incentives in the US if you believe your business can go anywhere, Puerto Rico is the place. Find out [e-mail] podcast how much money.

[Kimberly Adams]

Is Floating around in this Economy and why it Matters From American Public Media, this is Marketplace in Washington, D.C. i'm Kimberly Adams in for Kyrasdal. 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 spending. 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% trillion dollars. 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 Bespoke Investment Group says you can think of this as money that's really easy to spend checking accounts and cash held by the private sector, generally speaking. 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. 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 used to transact. There are a couple reasons why tracking M2 is important, says Ernie Tedeschi at Yale's Budget Lab. One, it just gives us a sense of the amount of spending potential in the economy at any given time. 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. The Fed creates money, it sends that money out into the broader economy, and it gets bonds back in return. 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]

Bostianczyk 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, Bostianck 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 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.

[Owen Zadar]

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?

[Owen Zadar]

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 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, you know, 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?

[Owen Zadar]

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 were promised in the campaign, or depending on who's counting, up to $10 trillion. The numbers are just staggering. So in the tension between tax reform like it's Christmas and the deficit camp, 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?

[Owen Zadar]

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, people who voted for them and interests that support them?

[Owen Zadar]

I think all of those are reasonable things. I mean, from a policy point of view, the goal is to have a big pie with equitable slices. And so we want economic growth and we want it to be broadly shared. And 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.

[Owen Zadar]

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, you know, thinking, like, look how easy this is. Like, it wasn't even a thought. They could put on a helmet without having to think twice about it. Whereas in the past it was always something in the back of my mind, like, I got to make sure I tie their hair back in a way that they're not used to, that they don't like.

[Matt Levin]

And.

[Tina Singh]

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 percent to end at 20,020. And the S&P 500 slid 2 points, you guessed it, less than a tenth of a% 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 4.58%.

[Matt Levin]

And you're listening to Marketplace, Serious about investing. You need to know about public.com. that's where you can invest in everything, stocks, options, bonds and crypto. They even offer some of the highest yields in the industry like the bond account 6% or higher yield that remains locked in even if the Fed cuts rates. What sets Public apart is how they give you the tools you need to make informed investment decisions. Their built in AI tool called Alpha doesn't just tell you if an asset is moving, it tells you why the asset is moving so you can actually understand what's driving your portfolio's performance. Public is a FINRA registered SIPC insured US Based company with a customer support team that actually cares. Bottom line, your investments deserve a platform that takes them as seriously as you do. Fund your account in five minutes or less at public.commarketplace and get up to $10,000 when you transfer your old portfolio. That's public.commarketplace paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities, options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC. Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC. Complete disclosures [e-mail] disclosures this Marketplace podcast.

[Sponsor Representative]

Is supported by Gusto. Paydays are great, but running payroll, calculating taxes, deductions, compliance? That's not easy. Unless of course you have Gusto. Gusto is simple online payroll and benefits built for small businesses. Gusto automatically files your payroll taxes and directly deposits your team's pay. Plus you can offer all kinds of benefits, 401ks, health insurance, workers comp and more. And because you're a Listener, you get three months free once you run your first payroll. Go to Gusto.com Marketplace that's Gusto.com Marketplace.

[Kimberly Adams]

Hi, this is Julie from Centennial, Colorado.

[Tina Singh]

I listen to Marketplace on my drive.

[Kimberly Adams]

Home from all my 3 to midnight ER shifts. Kai and the gang keep me awake and interested for my 30 minute drive. For someone not in the financial field.

[Tina Singh]

It'S a fantastic synopsis of all things business and economics. I love the commitment to showcasing a.

[Kimberly Adams]

Steady stream of brilliant and articulate women who are experts in their field.

[Tina Singh]

Join me in supporting Marketplace with a gift today.

[Kimberly Adams]

Go to marketplace.org donate 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 spin offs 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.

[Henry Epp]

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.

[Justin Ho]

I mean, it's a lot more fun.

[Kimberly Adams]

Than just figuring out a way to cut costs or develop new products.

[Henry Epp]

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

[Kimberly Adams]

Activists who are on the outside who.

[Justin Ho]

Are looking at the balance sheet can.

[Kimberly Adams]

See that, as they say on Sesame street, one of these things is not like the other, and it doesn't belong.

[Henry Epp]

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.

[Justin Ho]

The company may actually be more valuable.

[Tina Singh]

If it wasn't bundled with those assets.

[Henry Epp]

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.

[Kimberly Adams]

They're evolving and they're reconfiguring from what they were before.

[Justin Ho]

And so people are trying to reallocate.

[Al Kesh Shah]

Their assets in a way that will.

[Kimberly Adams]

Allow them to compete more effectively. But it's a guess, right?

[Henry Epp]

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.

[Tina Singh]

Said, this is a company in the.

[Owen Zadar]

Same space in industrials, and we could.

[Tina Singh]

Potentially try to do the same thing.

[Henry Epp]

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.

[Tina Singh]

Spinoffs are an excellent way of offloading debt, especially to the spun off company.

[Henry Epp]

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.

[Al Kesh Shah]

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

[Al Kesh Shah]

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.

[Justin Ho]

I think these agents have been pretty good. Often I would say they look like reports that I would expect to see from a human analyst.

[Al Kesh Shah]

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. Al Kesh Shah is at bank of America.

[Justin Ho]

You're creating software that can actually do things in the real world, multiple steps where you don't actually have to write.

[Matt Levin]

All of the code and give it.

[Justin Ho]

Exact directions on what to do.

[Al Kesh Shah]

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 totally, I'm still in the driving seat.

[Kimberly Adams]

I'm driving.

[Al Kesh Shah]

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 days, 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.

[Sponsor Representative]

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.

[Sponsor Representative]

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, you know, issues up until recently.

[Sponsor Representative]

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.

[Tina Singh]

I was.

[Kimberly Adams]

I was flabbergasted.

[Sponsor Representative]

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.

[Sponsor Representative]

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 the total tax bill of a jurisdiction. That is, how much property taxes does a particular jurisdiction collect?

[Sponsor Representative]

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.

[Sponsor Representative]

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, it's the job of the elected officials who determine the levies. So each of the jurisdictions determines its own levy. I would say in the long run, it's really the job of the voters to determine this if they are unhappy with these trends.

[Sponsor Representative]

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.

[Kimberly Adams]

The western suburbs, the northern suburbs are already built. 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.

[Sponsor Representative]

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 Sieck are the Marketplace editing staff. Amir Babawi is the managing editor, and I'm Kimberly Adams. We'll be back tomorrow. This is apm.

[Tina Singh]

Hi, this is Nicole from Camphill, Pennsylvania. I'm always surprised how much Content Marketplace can pack into 30 minutes. Listening is part of my daily routine. I love the way they make the content digestible and relatable. For us folks who don't have a strong background in economics or business, join me by making a gift to Marketplace [e-mail] donate.