The Indicator from Planet Money - What if our income was taxed ... totally differently?

Episode Date: February 24, 2025

We are back to answer YOUR listener questions. This time, we answer why bananas can be considered the 'unbothered fruit', what a flat income tax would actually look like, and how extended-hours stock trading works. If you have your own question about the economy, please email us at [e-mail]. Related episodes: My Favorite Tax Loophole (Apple / Spotify) The cautionary tale of a recovering day trading addict (Apple / Spotify) So imPORTant: Bananas, frogs, and... Bob's?? (Apple / Spotify) For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org. Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter. See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. Welcome to listener questions. Three listener questions, zero competition. Reland, that doesn't actually sound like an appealing pitch. Let me try. I can do this. Oh, hello, Robert Smith. Hello, how about this? Three listener questions all explained into your very ears.

Yeah, let's go with that. Yeah. This is the indicator from Planet Money, I'm Jerrym Woods. Today we answer your questions that you, the listeners, have sent in. We are taking on the resilient banana, a flat rate income tax, and stop trading all night long. All night long. That's all coming up after the break. All right, Waylon, your question is up first.

It comes from Tiffany Green. My question is about bananas. Can we talk about how they stay so cheap? No matter the time of year, the crazy inflated prices of other foods or weather disruptions, it never seems to bother bananas. They're a very unbothered fruit. The unbothered fruit. It's so poetic. I know.

It got me thinking actually about the very dark history of banana cultivation and everything that has led to the banana being so cheap for American consumers today. So I took the unbothered fruit description to our expert Luis Rivera, of the banana. professor at Texas A&M University. Yeah, that's a very interesting way of putting it, but yes, you know, bananas. Interesting. Luis works on trade policy's impact on agricultural production, so he's familiar with this world. He says it really is true. Bananas are both cheap and their prices barely move.

Yeah, I've often wondered how they keep banana prices so steady. Yeah, we've all seen food prices skyrocket since the pandemic starts. strawberries, you know, saw around a dollar increase per pound from 2020 to 2022. Then you look at bananas over that same period, and their price spike was six cents. Six cents, pretty small. My fruit salad is 100% bananas now. It's just a banana. Does that mean you're just eating a banana?

It's just a banana. Louisa's bananas have a bit of a buffer from market pressure. Banana buffer. The way that banana production is is very low. low-input, high-yield product, you'll be able to absorb more of those changes and not pass it down to the consumers as you have other products, for example. That high-yield is important because banana farmers make their money more on volume than per unit. But Luis explains there are a lot of things in favor of keeping banana prices cheap and price

resilient. Bananas aren't as perishable or expensive to produce as berries. They're less. seasonal. So for all these reasons, the banana is, for now, our unbothered fruit. Do do, do, do, do. Unbothered fruit, fruit. I think there's a future for you in banana promotion, Robert. Love it. Thank you, Waylon. Next up, we have a question for you, Mr. Robert Smith. Hi. My name is Frank Rincon from Dallas, Texas. My understanding is that a flat tax has a bigger effect on those making less money. But if the IRS were to go to a flat tax for individuals, what rate would everyone have to pay? Okay, I am really glad you're taking this on, Robert. We've actually gotten two emails about the possibility of a flat rate tax. People want to know.

Yeah, it's been popping up lately. Six states, including Arizona and Louisiana, have decided to charge their income taxes through a flat rate, meaning only one tax rate is charged whether you make, I don't know, $50,000 or $50 million. And which are those two do you make, Robert? I am not legally allowed to tell you that. Anyway, when the federal government taxes my $50 million, I mean, whatever my income is, it's at a progressive rate right now. So people are charged more like me, the more money they make.

So under a flat tax, somebody on a lower income who's paying a minimal rate or even no federal tax at all will pay more. But people on the top bracket who are paying a higher rate will likely pay less. Yeah, and that's definitely true, but it is a mixed bag because ideally when you have a flat tax, it'll bring it a lot more money from the super wealthy because it's closing loopholes and limiting deductions. Now, Robert, you mentioned a bunch of states that are taking on a flat income tax, but the listeners asking about the federal government. So is that even a conversation that's happening? Most recently, it's come up through the nonprofit tax foundation, who released a

proposal on how it could work at a federal level two. And to our listeners' question, did they come up with a number? They did. Drumroll, please. The Tax Foundation calls for a 20% flat tax. Right now it's somewhere between 10 and 37%. But to make enough tax revenue, it's not just about the headline rate. The proposal would find new income to tax by eliminating some major credits and deductions.

The nonprofit argues their plan would increase. the labor supply, GDP, wages, while raising hundreds of billions of dollars in tax revenue over the next decade. All right. This all sounds a little too good to be true, the flat taxers. Is there a pushback? Yeah, is there ever? I read that someone called a flat rate income tax class warfare, a roundabout way of reducing

the tax burden for higher income households while taking away incentives. It is hard to change something this big in the American economy without a lot of people hating you. Okay, well, Frank Ringcon, thank you for your question. Darian, you are up next with a question from Benjamin Gray from Denver, Colorado. My question for you is, why is after hours stock trading a thing? Can I, as a normal run-of-the-mill person, trade after hours? Why do prices, after hours, sometimes move with seemingly more volatility than during trading hours? So let's start with the basics.

U.S. stock markets like the New York Stock Exchange or the NASDAQ are open from 9.30 a.m. to 4 p.m. Eastern Monday through Friday. And those hours are in place for a reason. It means that everybody in the U.S. can trade on an even playing field. Yeah, it's like they all get the same business news and everyone goes to sleep at roughly the same time. But if it's in the evening and you get a notion, then you just have to buy some, I don't know, Home Depot shares. There is one way you can do that. which is extended hours trading. This trading happens electronically between a smaller number of traders earlier in the morning and further into the evening. Ben Johnson is with the Investment Services Company Morningstar, and we asked why it became a thing. After hours, stock trading is a thing for many of the same reasons that Wendy's spicy chicken sandwiched Pringles are a thing. It's not because they need to be a thing, but it's because there's demand there.

That's a thing? Wendy's spicy chicken sandwich Pringles? It's the first time learning about this. I have a different question. Let's answer this question instead. Do not answer this question. I have not heard about these Pringles either. But going back to stock trading hours, it is a disadvantage to trade after hours.

You have less liquidity for one thing. So, Daryan, I'm just going to hop in here to translate what less liquidity means. Please. During the day, there's so many people. buying and selling stocks, that if you want to sell a stock at $200 during the trading day, you're more likely to find someone willing to pay that price, $200 because there are more people, more money, more liquidity. Exactly. So the risk with after hours trading is that there would be less liquidity. If somebody wanted to sell the same stock after hours, the highest bid might only be

$190. Morning Stars, Ben Johnson explains that fewer traders means more volatility outside the normal trading day. After hours prices tend to be more erratic precisely because there's less trading. There's less buying and selling activity. And by extension, there's sort of less informational content going into setting the prices. Robin Hood, Charles Schwab and others have taken this extended hours concept one step further, 24-hour trading Monday through Friday. They kind of create their own market for when the real stock markets are closed. And also, the New York Stock Exchange wants approval to extend its own hours to 22 hours a day. Thank you, Ben, for the question. And also to Tiffany and Frank. If you have your own economics question, please email us. We are

at indicator at mpr.org. This episode was produced by Cooper Katz McKim with engineering by Gilling Moon. It was fact-checked by Sierra Juarez. Cake and Canon edits the show and The Indicator is a production. of NPR.