Marketplace - The erosion of the American tax base

Episode Date: May 7, 2026

After the One Big Beautiful Bill Act reduced taxes for 85% of households, disproportionately benefiting high-income earners, all eyes are on the GOP’s approach to taxation. But they’re not the only ones, as Democrats, too, seek to cash in on the tax cut strategy. “Marketplace” Host Kai Ryssdal spoke with Annie Lowrey, a staff writer at The Atlantic, about what that dwindling tax base could mean for public works and our national debt. But first: Whirlpool reports “recession-level low” demand, the first quarter’s lower-than-expected productivity, and a look into how some business owners are approaching tariff refunds.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

Right now, you can help unlock $25,000 from the Marketplace Investor Challenge Fund. That means your support for Marketplace goes even further, helping keep trusted economic reporting free for everyone. Answer the call of Marketplace investors who've made extra gifts to the Investor Challenge Fund to inspire you to take action. Be one of 500 gifts needed by Friday to unlock $25,000 in extra funding. Donate now at Marketplace.org or click the link in the show notes. And as always, thanks.

Worker productivity is a key measure of this economy. What happens, though, if it's robots and AI that are being productive? From American public media, this is Marketplace. In Los Angeles, I'm Kyle Risdahl. It is Thursday, today, 7 May. Good as always, to have you along, everybody. It doesn't get a whole lot of headline love. Worker productivity doesn't.

It's not one of the A-list. like jobs or GDP, though it probably ought to be given as critical as it is to the growth of this economy? We learned this morning productivity growth slowed a bit in the first quarter. It increased just 8 tenths of 1% growth did. That's according to the Bureau of Labor Statistics. Year on year, though, growth comes in at a satisfyingly more robust at 2.9%. And that's happening. As Marketplace Elizabeth Roval reports to get us going at a time of massive investment in AI,

and accompanying massive productivity promises. Trying to understand productivity using quarterly data is kind of like using a weather report to understand the climate, says Gerald Cohen with UNC. It's hard to discern even trends with a few years of data. He says U.S. productivity isn't as bad or as good as today's quarter on quarter or year-on-year numbers say it is. But the fact that we continue to see stronger productivity growth, you know, in the is suggestive of a pickup.

He says annualized productivity growth since 2019 is around 2.1%. Better than the last decade or so, but it could be higher. So how much of today's gains are coming from AI? I think AI, full story of AI-driven productivity is still a few years away from us. That's Yelina Shalachiva with a conference board, who thinks productivity growth today is more about automation coming out of the pandemic. Companies had to invest a lot into automation because labor was not available and it was so expensive. Think of self-checkout at the supermarket.

Another sector that's made gains because of the pandemic, restaurants. It's pretty much driven by DoorDash. That's Erica McIntarfer with Stanford. So lots of people developed DoorDash habits during the pandemic that they have not given up. and it has expanded the revenue potential for many restaurants. She says there's also been a productivity boom in the gambling industry. It is now much easier to gamble on your phone. So that obviously means more profit for gambling companies.

They are doing very well. While it is too soon to extrapolate much about AI in this current productivity data, Chapman University's Seth Benzel says, In the medium and long term, the productivity story is about AI. It is about automation. It is about, you know, increasing output with fewer workers. So when it comes to productivity gains, don't worry. The robots are coming.

I'm Elizabeth Troval for Marketplace. Oh, I feel much better now. Wall Street on this Thursday, the robots, that is, the algorithms that do so much of the trading. Well, they were a tad pessimistic. We will have the details. when we do the numbers. This is not, generally speaking, a program about math, but bear with me for a second here while I spend a little time on two numbers, the gap between them and why it matters.

Last week, we got the early estimate of gross domestic product for the first quarter of the year. That's January through March. 2% even is what GDP came in at. You might remember that. Buried in that report, though, was another number that grew at 2.5. percent in the first quarter. That category, that number, is final sales to private domestic purchasers. It's quite a mouthful. I know. It sounds like the most technical, confusing thing. I'll be honest. It kind of does. But I promise you'll only hear me say that whole mouthful a couple of more times. That was Menz Echin, by the way. He's a professor of economics at the University of Wisconsin-Madison. And Kerry Freestone, she's a senior U.S. economist at RBC. Basically, We're talking here about a measure of American demand.

When you realize that it's actually just business investment, housing, and consumption, it's actually much easier to think about it. It is. That's true. But to understand it and why we want to know it, you've got to know the formula for GDP. Yes, it's Matt. Truly, I'm sorry. Say it with me now. We've been over this a couple of times. GDP is C, that's consumer spending, plus I investment spending, plus G.D. government spending plus X exports minus M imports, net exports. In other words, that is the equation for GDP. Now, final sales to private domestic purchasers, and let me say that again real slow, final sales to private domestic purchasers, zeroes out three categories in GDP so that we can get a better sense of how the domestic economy is going.

core GDP, you might call it. Category number one subtracted from GDP? Net exports. We get rid of it because net exports is about demand from other countries. What we want to measure is demand from American businesses and consumers. All right, expendable category number two. Inventories. Here's why. If you had a whole bunch of unsold cars, do you really want that in your measure of what people want to buy? Well, no, because you remember last year when companies were stockpiling goods to get ahead of tariffs, you definitely do not want all that unsold stuff that's just sitting there in your calculations for sales that might not come until six months later. Category three that we subtract from GDP. Government consumption. At the end of last

year, there was that government shutdown. You remember that right? And GDP grew at a measly 0.5%. But if you look at consumer and business demand back then, which ignores all the government spending that didn't happen, growth was actually close to 2%. So it gives us an idea of, you know, the underlying health of the economy as far as consumers are concerned and businesses. Which is why, soon to be former Fed Chair Jay Powell always talks about the central bank watching this as a better sign of where the economy might be going than headline GDP. You know, at the end of the day, it will continue to be government shutdown.

So it'll continue to be trade distortions. So it's really, you know, when we strip out all that noise and we look beneath the hook, you know, how healthy is the U.S. economy? How healthy indeed, because the calendar is kind of interesting here. We're going to get two more updates on first quarter GDP, and obviously, along with it, final domestic demand, only one month of which March will have included elevated government spending on the war. But then in the late July, we'll get an early whack at second quarter data, which will, as things look now, have lots of government war spending, and we will

turn to final domestic demand to know what's really going on here. I haven't actually counted, but I would guess that I have said the market is an idiot, maybe half a dozen times on this program the last two months. The price of a gallon of gas in this country is up by more than half since the war started. Natural gas prices are squeezing Europe and Asia really hard. Estimates by people whose job it is to study and predict this stuff say it could be years, literally years, before things are back to something even resembling normal. And yet, the S&P 500 yesterday hit another all-time high.

Brian Walsh is Senior Editorial Director at Vox, where he wrote the other day about why markets are so bad at pricing in, you know, reality? Brian, welcome to the program. It's good to have you on. Good to be here. Take us back, would you, as you do in this piece to the closest analog, I think, that applies here, COVID and the way the markets reacted? So with COVID, all through January 2020, you were seeing cases grow in China. You started to see huge lockdowns and going into February. You started to see sort of cases popping up elsewhere, Italy. And yet, the markets didn't really respond.

And in fact, February 19th, 2020, the S&P 500 hit what was then an all-time high, even as looking at, back, we were clearly already in a pandemic situation. And here now we have the straight-of-horn moves closed. There's a war. All those things are slowly piling up. And yet, the markets seem, this is pejorative, perhaps, but untethered from reality. What in your mind is going on here? It seems as if the markets are pricing peace, where the oil system, the one that actually

moves oil around, actually gets people who need it, is not producing peace. And that's a massive gap that hasn't closed yet. you know, even oil prices themselves are not pricing in the physical reality of oil and what this huge disruption means. Yeah. So I think not connected to reality is a pretty good description in the situation. You describe it as economic blindness in this piece. I wonder if one might also say willful ignorance. It does feel that way. I think there's a myopia going on here with the markets where they're not seeing the reality in front of them. I think they also assume that everything will work out. They've seen Trump back down in the past with things like tariffs.

What they don't seem to realize is that unlike tariffs, he does not have the unilateral power to simply make this situation go away. What happens when a major U.S. airline says that it has to cancel thousands of flight the way a European airline like Lutense already has. What happens when you start to see farmers really grapple the fact that fertilizer prices are much higher and scarcer, that has an impact on crop prices, which then has an impact on food prices. I'm not sure what the actual triggering event would be if I could predict that. I would be a lot richer than I am right now, certainly. But what I know is that you can only ignore reality for so long. So there is that line. I'm going to say it was Hemingway, but somebody else is going to hear it and say,

no, no, no, you're attributing it wrong. It's that whole thing about things happening very slowly and then happening all at once. And as you point out in the beginning of this piece, this is what happened with COVID, right? We finally clued in and everything fell apart. Do you fear that this time? Yes, it's exactly what happened with COVID. I mean, you know, you had what was the fastest market contraction ever in the weeks that followed that February 19th all-time high. I think that's entirely possible.

I think it doesn't seem very likely to me that this problem will simply go away. But the longer this continues, the more that will, reality will assert itself. Not to anthropomorphize this thing at all, but human beings, you know, we beat back the wolf closest to the sled. And what is ever happening, you know, 10 miles down the trail. That's not our problem right now, you know. This is a very human reaction. It is absolutely. I mean, like, that is we are very good at looking at threats right in front of us.

I guess you could say, evolutionary speaking, we would not have been around very long if that hadn't been the case. When it comes to those slower moving, more disparate threats where you're getting a drip, drip, drip of bad news, that's easy for us to miss. I think you can look at it with other longer term threats like climate change or even what would happen with AI. It's just very hard for us to, for you those is actually happening and certainly to respond to them often until it becomes unignorable. and then that response tends to happen all at once. Do you suppose we can get better at this? Is this a thing we can learn how not to do the next time this happens? I'd love to say that's the case.

And yet we keep doing it over and over again. It makes me think it's something that's very deeply rooted in human nature and probably serves us most of the time, right? It would not be great if we were jumping at every shadow on the cave wall, so to speak. I hope we can learn from history. That's what I was trying to do with this piece, honestly. I was trying to think back to COVID. It's something I understood a lot more than I do oil markets.

And yet even I in the moment really couldn't make myself believe it was happening when it was happening until, honestly, it was a bit too late. So I'd love to say that we can get better at this, but I know human beings too well to think that's likely. Brian Walsh, senior editorial director at Vox, also works on Future Perfect for them. Brian, thanks a lot. I appreciate you. Thank you. Coming up. We want big government and big deficits.

We do? First, though, let's do the numbers. Dow Jones Industrial average down 313 today, 610% 49,59,596. The NASDAQ subtracted 32 points, 10th percent, 25,000, 806. The S&P 500 down 28 points, 4 tenths percent, 73 and 37. A whole bunch of food and restaurant companies reported today. McDonald's beat expectations, but missed its sales production, thanks to increase fuel and grocery prices squeezing consumers. Lather rinse repeat. Mickey D's called a 10th of 1%.

Shake Shack reported a loss for the quarter. That pushed its shares to a two-year low. Shake Shack gave back more than 28%. Papa John's International fell short of revenue and profit projections for the quarter. The pizza chain shrank, shrank, rather, two and three quarters of 1%. Crispy cream just wrap things up,

beat the street's estimates for the quarter, and yet declined 1%. Bonds down, yield on the 10-year T-note, up 4.38%. And you're listening to Marketplace. Right now, you can help unlock $25,000 from the Marketplace Investor Challenge Fund. That means your support for Marketplace goes even further, helping keep trusted economic reporting free for everyone. Answer the call of Marketplace investors who've made extra gifts to the Investor Challenge Fund to inspire you to take action.

Be one of 500 gifts needed by Friday to unlock $25,000 in extra funding. Donate now at Marketplace.org. or click the link in the show notes, and as always, thanks. This is Marketplace. I'm Kai Risdahl. Here is a phrase you do not want to hear when a major American manufacturer reports earnings. Their North American sales, World Pool, said this morning, are near, and this is a quote, recession-level industry decline. We are not, repeat, not in a recession, adding the obligatory yet here,

But when a company that makes things like fridges and dishwashers tells you that sales of same were off nearly 7.5% last quarter amid soaring energy costs and falling consumer confidence, it does tend to concentrate the mind. Daniel Ackerman takes it from there. Recession is not too strong a term for the drop in sales at Whirlpool, says David McGregor, an analyst at Longbow Research. The last time we saw numbers down this much was back in the great financial recession. This time around, the Iran War has led to higher energy costs that have stressed consumer budgets. And Whirlpool has had an especially strange time with all the tariff back and forth. It makes more of its appliances in the U.S. than competitors do. So McGregor says the Aiepa tariffs last year were actually good for Whirlpool.

In terms of creating a more level playing field. But in February, the Supreme Court struck down those tariffs as illegal. At that point, a lot of the competitors turned much more problematic. emotional in anticipating refunds. Refunds that mostly won't be going to Whirlpool. There are also broader challenges facing the industry. Neil Saunders, managing director of global data, says there are a few main drivers of demand for appliances.

One of them is repair and replacement, so when things break, you can either replace or you can buy new. On that front, we do see more people repairing because it is often more cost-effective. That means parts might be selling okay, but shiny new, appliances, not so much. Sondra says the next driver of demand is upgrading. So it's saying, well, look, my product isn't broken, but I'd quite like a new one with new features. And their demand has been very sluggish. A smart oven in this economy? And finally, there's one of the biggest drivers of appliance sales. Every new home that gets built needs a washer and dryer. They need a refrigerator.

Ali Wolf is chief economist with Zonda. She says the housing market is sagging in both the U.S. and Canada. So they're getting the one-two punch of two very large economies having slower housing markets. And with interest rates still elevated, Robert Deetz, chief economist with the National Association of Home Builders, says the situation may not improve soon. We expect single-family home construction in 2026 to be down about 3 to 4%. And Deetz says for every home that doesn't get built means around $12,000 that don't get spent on appliances. I'm Daniel Ackerman for Marketplace. The Tax Policy Center says the GOP's big tax and spending law from last year cut the tax liability

of 85% of U.S. households, disproportionately, yes, favoring higher income households. At the same time, data from the Institute on Taxation and Economic Policy tells us 88 of the biggest companies paid no federal corporate income taxes in their most recent fiscal year. So, if most of us are paying less in taxes and a whole lot of big companies are paying nothing in income taxes. Who is footing the national bill? Annie Larry is a staff writer at the Atlantic where she wrote about our tax, you know, challenges the other day. Any welcome back to the program. Good to have you on. Thank you for having me. I'm going to steal a line from you early in this piece where you say basically it kind of looks like we're having a tax revolt now. How did we get here?

We got here right slowly and then all at once, as feels kind of classic. So, you know, I know that both of us remember a time that members of both parties talked about broadening the base and reducing rates. And really, over time, both parties have completely abandoned that position for sort of different reasons. Donald Trump's second term tax bill really lards the tax code up with a lot of provisions that don't just reduce the amount of revenue that the government is taking in. They make the tax code much more complicated.

So a really good example of this is the no tax on tips provision. At the same time, Democrats have become much more enamored of using things like tax credits in terms of social welfare policy. And now you're starting to see this huge movement that's really, really taking over in the states. There's been now for several years a real revolt against property taxes. And it just feels like this ball is rolling down the hill now. And we're really not talking about either tax simplification or even just raising enough tax revenue because we're running a really big deficit right now. This is going to sound like a facetious question, but does nobody understand that we need a tax

base in this economy? I worry that, you know, members of both parties really aren't incentivized to see it that way. We were told by deficit hawks for decades now that if our deficits ran for long enough and our debt got big enough, we would be punished by the bond market. And it just has not happened. Nevertheless, we're currently running a deficit of roughly $1.5 to $1.8 trillion a year. It's huge. It's enormous. And that's contributing to some of the economic problems that we're having right now. Inflation comes directly downstream from that, right? And I'm not talking about balancing the budget or eliminating the debt or paying for every little thing. But it is true that at some point, the balance is going to have to be different because our economy is changing as the population ages and as population growth slows down. There will be people screaming at their radios or at their streaming devices right now saying,

oh, it's all the Republicans. All they want to do is tax cuts. And on the other hand, it will be, oh, it's the Democrats. All they want to do is spend money. We should be clear here that both parties don't like to pay for what they want to do. Yes? Absolutely. And at least on the Democratic side, they have said that they will not raise taxes on anybody who could conceivably describe themselves as middle class, right?

People in the 97th, perhaps even the 98th income percentile. And what that means is for Democrats that really limits the possible in terms of policymaking. And then Republicans have shifted from sort of a we want small government and small deficits to we want. big government and big deficits, right? And so, no, neither party wants to be the one who's left holding the bag on this. And like at some point, I think that we're going to face some kind of issue here. Well, keep going. Some point is not today. And if it ain't today, man, it's not my problem, right? Absolutely. But the U.S. population is aging, right? And especially since we have taken a turn against immigration, so we're not welcoming in new, younger people. You're going to have fewer workers

relative to people not working in the economy, and spending will go up because people will need Medicare. They'll need social security. They'll need long-term care. And at that point, you could be, you know, kind of forced by the bond market to do something like implement austerity budgeting. I think that that is, you know, truly a possibility. And part of the reason that economists suggest raising more tax revenue now, not in the future, is just avoid dramatic policy making in general, so that we don't have to jolt the economy or, you know, make things different. It doesn't need to be because, you know, the bond catastrophe is suddenly on our door. Right. With the understanding that, you know, this economy has always been a fulcrum of politics in

this country. Yes. It does sort of seem like it's kind of become a play thing now. Oh, certainly. And the place where I start to get really, really worried is at the state and local level where states and cities and towns largely need to balance their budgets. Like by law they have to. Yeah, by law. And so for them, if they're starting to say, hey, we're not going to ever raise taxes on anybody and also we're going to exempt people making overtime, people with tipped income, retirees who own their homes from property taxes. For states and cities, There's just real question of like, okay, well, where's the money going to come from? Annie Lowry is a staff writer at The Atlantic. This is a piece. You ought to read after you hear this interview. Annie, thanks a lot.

I really appreciate it. Thanks for having me. This final note on the way out today, which you already know, if you bought a plane ticket recently, the Department of Transportation said this week that U.S. airlines spent 56% more on jet fuel in March than they did in February. Straight of Hormuz, by the way. Last time I checked, still closed. Our daily production team includes Olivia Burdette, Andy Corbin, Maria Hollenhorst,

Sarah Leeson, Sean McHenry, Michaelasea, and Sophia Terenzio. Will Storri is the supervising senior producer. And I'm Kai Rizdal. We will see you tomorrow, everybody. This is 8 p.m. The economy moves fast, and when headlines turn on a dime, it is essential that you feel informed rather than overwhelmed. Hey, I'm David Brancaccio, special correspondent for Marketplace, and an avid reader of the Marketplace newsletter, not that I'm partial.

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