#887: You Asked For It, Yet Again On today's show we answer questions about silver dollars, Venmo, and Brexit. Why? Because you asked!
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#887: You Asked For It, Yet Again

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#887: You Asked For It, Yet Again

#887: You Asked For It, Yet Again

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KENNY MALONE, BYLINE: Hold on. Hold on. I have a thing.


All right. I have Kenny Malone in the studio, and he is digging in his pockets.

MALONE: Wait. I don't know where it is. Where is this? Oh, here.


MALONE: OK, ready?

K DUFFIN: All right. It's shiny.


K DUFFIN: Oh, what is this?

MALONE: This is an American Silver Eagle.


MALONE: It's a 2018-minted coin.

K DUFFIN: I've never seen one before.

MALONE: Yeah. This was minted by the U.S. government. It is legal tender. And, here. You want to read this part right there?

K DUFFIN: OK. All right. It says $1.

MALONE: Yeah. This is a $1 coin.


MALONE: I could go downstairs. I could buy a candy bar with this.

K DUFFIN: All right.

MALONE: That'd be really stupid.


MALONE: Because - here. Read this part.

K DUFFIN: OK. This says 1 ounce - oh, 1 ounce of fine silver.

MALONE: This is, like, essentially pure silver.


MALONE: So while the face value is $1, the metal value of this coin today, at this moment, is, like, around 15 bucks.

K DUFFIN: OK. So if you bought a candy bar with that, the clerk would feel pretty sneaky.

MALONE: Yeah. It would be a terrible deal for me.


MALONE: That's why you don't see these in circulation a lot. And there's actually a golden version of the American Eagle coin. It's a $50 face value, and the metal is worth, like, $1,300 dollars today.


MALONE: So this gets us to our listener question, and it comes from a listener named Chris.

K DUFFIN: Right, because today's show, we are answering questions from listeners. So what did Chris ask?

MALONE: He, essentially, wants to know, is there a way to take advantage of the fact that the U.S. government is minting these weird coins - coins with different face values from their market values?

K DUFFIN: OK, that's a good question.

MALONE: Chris is not the first person to notice this opportunity.

K DUFFIN: All right.

MALONE: About 25 years ago, there was this businessman in Las Vegas, had a few businesses - plumbing, air conditioning, painting. And he came up with a way to use these coins to get out of paying payroll taxes.

K DUFFIN: What did he do?

MALONE: Well, so let's say that I was, like, a painter working for this gentleman. I would go up to the payroll window at the end of my week, and I would say, hello, I'm here for my wages.

K DUFFIN: OK, you're doing air quotes.

MALONE: Uh-huh. Uh-huh. And the person in the window - they would hand me a bunch of silver and gold coins that had face values that were, like, 50 bucks.

K DUFFIN: All right.

MALONE: So $50 in coins. And that's the transaction that was on the books. I got paid $50. But then, I could take my coins to literally a window next door...

K DUFFIN: Like, physically next door?

MALONE: Yup. Right next door.


MALONE: And then I would hand my coins back to a person who would give me actual cash at an exchange rate of about, like, eight times. So I would get $400 in this example. But that $400 - that wasn't going to affect payroll taxes because that exchange - that didn't take place at the office's payroll window. It happened at the very convenient office gold exchange window.

K DUFFIN: Right. Right. Exactly. OK, so what we have here is entrepreneurial tax evasion, basically.

MALONE: Tax avoidance...

K DUFFIN: Avoidance.

MALONE: ...In his mind.

K DUFFIN: OK, because he only has to record that he paid the face value - like, 50 bucks.


K DUFFIN: But then, the employees are going to get $400 because they're cashing in...


K DUFFIN: ...On the value of the metal.

MALONE: And everybody wins, right?

K DUFFIN: That feels kind of creative, actually.

MALONE: And this is not just, like, a little mom and pop operation. Over about five years, this businessman paid more than $25 million in wages this way.

K DUFFIN: Million - that is crazy.

MALONE: And he was not only using this for his businesses. This scheme was so inventive, he also became a payroll contractor and then helped other businesses pay almost a hundred-million dollars in wages through this coin scheme.

K DUFFIN: OK, so he's, like, franchising tax avoidance.



MALONE: Unfortunately, when the IRS found out about this, they did not think it was as clever as we do.

K DUFFIN: Not so excited.

MALONE: He was charged with tax evasion and then sentenced to almost 16 years in prison and ordered to pay the U.S. government back about $16 million.

K DUFFIN: Did he try paying with silver coins?

MALONE: You know, I really hope so. But to answer Chris' question, can you take advantage of the face value-market value difference of American Eagle coins?

K DUFFIN: Probably not.

MALONE: No, no.

K DUFFIN: OK, definite no.

MALONE: Hard no. Hard no.

K DUFFIN: Definite no. Chris, do not do this.


K DUFFIN: Do I get to keep the coin?

MALONE: I don't know. I should find out if I can expense this.

K DUFFIN: Oh, because you bought it.

MALONE: I just bought it.

K DUFFIN: All right. We'll ask Alex.

MALONE: Yeah. Right.


K DUFFIN: Hello, and welcome to PLANET MONEY. I'm Karen Duffin. Every day, we get dozens of messages from you, our listeners - lots of great questions, like this one from Chris. We do read them all. Sometimes we make stories out of them. And sometimes we gather up a few of the ones that stumped us, and we find you answers. Sometimes we even save listeners from jail time for tax evasion.

Today on the show, listener questions. We will take you to a ferry in England. We will introduce you to a new way to stalk your friends online. And we will talk taxes.


K DUFFIN: I have Jacob Goldstein in the studio with me now. He is back from book leave. We are thrilled to have you back, Jacob.


K DUFFIN: So, Jacob, Alexandria Ocasio-Cortez - she is the newly elected congresswoman we've been hearing lots about. She has proposed raising marginal income tax rates, and there are lots of questions about what those are. And so we are here to ask you, can you explain marginal tax rates?

GOLDSTEIN: I'm thrilled. I'm very excited about this one.

K DUFFIN: I'm so glad.

GOLDSTEIN: OK, so there's this very basic idea about income taxes in America that is noncontroversial. And that is income taxes should be progressive, right? And that means rich people should pay a higher percentage of their income...


GOLDSTEIN: ...Than poor people, right?

K DUFFIN: OK, so not just higher because they're earning more, but a higher percentage of their wealth.

GOLDSTEIN: Yes. Pretty much everybody agrees on that.


GOLDSTEIN: But that creates this interesting kind of math problem - right? - because, say we decide people who are earning - whatever - less than $10,000 a year shouldn't have to pay any income tax at all. And then we decide, you know, $10,000 to $20,000 - if you're in that band, you should pay - whatever - 10 percent of your income as tax, OK?

K DUFFIN: Got it.

GOLDSTEIN: But if we do it that way, there's a problem because in the system we've just created, people who are making $9,999 a year pay zero. People who are making $10,000.00 now have to pay 10 percent of that.

K DUFFIN: So people are going to game the system to try to earn $9,999.

GOLDSTEIN: Yeah. I mean, you actually go backwards - right? - because...

K DUFFIN: Right.

GOLDSTEIN: ...After your taxes, if you're making 10,000, you're actually making 9,000, and you're worse off than the person who earned less than you.

K DUFFIN: Oh, right.

GOLDSTEIN: So that is a disaster of a policy. So we come up with the marginal income tax.


GOLDSTEIN: And what that says is each sort of chunk of your income gets taxed at a different rate, right? So the first $9,999, you pay zero on. And then the next chunk - say 10,000 to $20,000 - you pay 10 percent on, right?


GOLDSTEIN: So if you're making $10,001, all you would owe is 20 cents in tax. And, you know, we can keep doing this up and up and up, right? We can add another higher marginal tax rate. We can say, we're going to tax income over $20,000 a year at, say, 20 percent. And in the real world, we have seven of these steps - of these chunks.


GOLDSTEIN: They're called brackets. All the way up to a top bracket - a top marginal income tax rate that starts at over $500,000 a year if you're single, over $600,000 a year if you're married. And every dollar over that amount in that top bracket is taxed at 37 percent.

K DUFFIN: OK, so currently, the highest marginal income tax rate is 37 percent. And what Congresswoman Ocasio-Cortez is proposing is basically one more step above that, which would be at 10 million and above, people would be taxed 70 percent.

GOLDSTEIN: So in that universe, it would still, presumably, be 37 percent for every dollar you make between 500,000 and 10 million.


GOLDSTEIN: And then every dollar over 10 million is taxed at 70 percent.

K DUFFIN: OK, which the vast majority of us will never, sadly, have to worry about.

GOLDSTEIN: I mean, speak for yourself.

K DUFFIN: (Laughter) OK, Jacob has big dreams for his book. All right, thanks so much, Jacob.

GOLDSTEIN: Thanks, Karen.


K DUFFIN: We have Bryant Urstadt in the studio. He edits the show. But today, we have him on mic.

BRYANT URSTADT, BYLINE: Answering questions.

K DUFFIN: That's right.

URSTADT: So, Karen, we got a question from a listener who wanted to know what's up with the Brexit ferry. And by ferry, I mean the kind you find on the ocean. And I'm going to play you some sounds to get us in the mood for a serious show about the future of England's GDP.

K DUFFIN: All right.



K DUFFIN: OK, I'm going to fall asleep in a second.

URSTADT: OK, before that happens, let's quickly turn to economics.

K DUFFIN: All right.

URSTADT: So that is the sound of the ocean, obviously. And it's in the Port of Dover in England, where I found NPR's London correspondent Frank Langfitt.

Did I hear a seagull?

FRANK LANGFITT, BYLINE: Yes, we have seagulls. We brought them in for this.

URSTADT: (Laughter) Nice. Good.

LANGFITT: We did, yeah. Couple of stunt seagulls. You bring them in cages.

URSTADT: It's nice atmosphere.


URSTADT: And can you see France?

LANGFITT: Yeah. I can see some, like, hills or cliffs over in Calais. So yeah, it's pretty close.

URSTADT: So Dover is England's connection to France. It's where the channel is - the tunnel for the track that runs under the English Channel. And it's a huge port. Frank told me 10,000 trucks a day cross the channel here.

LANGFITT: Yeah. I mean, right now, I'm looking at an entry ramp onto the port. And you can just see trucks rolling down it right onto the ferries. And there's no customs check or anything like that. It's seamless, just like taking the ferry, say, from Delaware up to southern New Jersey. It's the same kind of thing, except you're actually traveling from one country to another.

URSTADT: And all this seamlessness might just end soon.

K DUFFIN: Right. Because Parliament is just about to vote on whether or not to accept Prime Minister Theresa May's exit deal.

URSTADT: Exactly - her Brexit deal. Because in order to leave the EU, there are two ways to go. And one is with everything organized and agreed on with all the other countries in Europe, and the other is to just say goodbye.

K DUFFIN: See ya.

URSTADT: See ya.


URSTADT: If Parliament turns down May's Brexit deal, it makes it just a little more likely that England could leave without any kind of deal.

K DUFFIN: Which would completely change this scene in Dover.

URSTADT: Totally.

LANGFITT: You would have custom checks for the first time in, probably, decades. And even - there are estimates that even if it takes 60 or 70 seconds to clear a truck that that could create miles and miles of truck backups and really slow down trade.

URSTADT: A university did the math and figured out that there would be six-day queues. In other words, traffic that would take six days to clear - just permanent gridlock. So England has thought, maybe we should start working on getting some other ports moving. And they started talking to other ferry companies and other ports, like Ramsgate, which is just north of Dover.

LANGFITT: The government gave a contract to a company called Seaborne. This got a lot of attention because the Seaborne company doesn't actually own any ferries, which would seem to be a good thing to have if you were a ferry company.

URSTADT: So yeah. That probably is not going to work right away. They were moving fast. They were moving fast.


URSTADT: But Europe is connected now, and there are all kinds of industries that completely depend on things getting there really quickly. So the people who do this stuff - the people who deliver things are making all kinds of backup plans. Frank talked to one guy who owns 250 trucks, and here's his solution.

LANGFITT: He spent over a million bucks to buy a helicopter.

URSTADT: Why? How is that going to help him?

LANGFITT: Well, if things go really badly, he can load small items, like lighters - things like that - and be able to fly them across the channel into Europe and land and take them directly to the factories to keep the factory lines going.

URSTADT: So in short, this ferry problem is just one of a long list of things that Brexit is screwing up. So this country is kind of stuck doing a thing it's pretty sure isn't going to work out that well.

LANGFITT: I think that's true. Hard to find a legitimate economist who doesn't think that this makes the United Kingdom both poor and have a lot less leverage because it's not a part of this giant single market in Europe.

URSTADT: So, Karen, bad news in England.


URSTADT: But I do have some more calming wave tape if you want to go out on that.

K DUFFIN: OK, please. Yes.


K DUFFIN: All right, to answer the next question, I have to take you back to an episode we did in 2017. It was about the gross domestic product forecast coming out at the White House - the GDP forecast. They were projecting 3 percent growth over the next 10 years, which, to be clear, is much higher than what anybody else was projecting. And then Trump, as he talked about it, pushed the forecast even further. Here's a clip from our original episode.


PRESIDENT DONALD TRUMP: And I say there's no reason we shouldn't be able to get, at some point into the future, to 5 and above.


STACEY VANEK SMITH, BYLINE: I just - it's really - you got to respect the optimism.

K DUFFIN: OK. So clearly, along with most economists, we were skeptical of that projection. But at the end of last year, GDP did hit 3 percent for that year. So a lot of listeners have written to us with questions like this one from David Gross in Houston.

DAVID GROSS: Hey, PLANET MONEY. I was curious if y'all would revisit the episode, Here We Grow Again. It explored how unlikely it was to reach the 3 percent GDP growth in President Trump's budget. However, it looks like that target may have been achieved in 2018.

K DUFFIN: That is a fair question, so I brought Darian Woods in to answer this. Darian is a producer here.


K DUFFIN: Hey, Darian.

WOODS: So in the original episode, we spoke with a guy named Marc Goldwein. He's an economist for the Committee for a Responsible Federal Budget. And earlier this week, we called him back up.

MARC GOLDWEIN: There's a difference between long-term sustained growth and near-term growth.

WOODS: He says, yeah, we did hit that 3 percent last year, but that's just for one year. The forecast was for 10. So I asked him, is this kind of growth likely to continue?

GOLDWEIN: There's only one single forecaster out there that's estimating even close to 3 percent growth. That's the White House.

WOODS: Marc says there's basically two reasons why this growth probably won't last. The first reason for the 3 percent growth was that last little bit of the recovery happening from the 2008-2009 recession. He says that probably won't continue. The second reason - not all growth is created equal. And the current 3 percent growth...

GOLDWEIN: A large share of it is the one-time effect of a huge $150 billion a year spending bill and an even larger $200 billion a year tax cut.

WOODS: Marc says this 3 percent growth rate's not because we have fundamentally changed the economy in a way that will last and sustain growth. It's primarily due to the huge spending bill, a big tax cut - some one-time events with effects that won't last. Marc has a term for it.

GOLDWEIN: A sugar high. When I drink my morning coffee or eat a lot of sugar, that's going to cause the economy to go into hyperdrive for a period of time, but it's likely to be followed by a crash unless we do something to boost that productive capacity.

WOODS: In fact, Marc says, if we stay on this path, we're in trouble.

GOLDWEIN: We're in big trouble fiscally, and there's not an easy way out.

WOODS: So you're really worried.

GOLDWEIN: I'm extremely worried.

K DUFFIN: OK. So, David, our listener, you are right. The United States did hit 3 percent growth last year. But it sounds like it's probably temporary.

WOODS: Yeah, that's right, though Marc says if he's wrong about this...

GOLDWEIN: I will gladly email that listener and tell them that it looks like I was wrong.

K DUFFIN: Thanks, Darian, for the good news-bad news.

WOODS: Thank you, Karen.


K DUFFIN: Shane McKeon.


K DUFFIN: You are our intern, and this is your last day at PLANET MONEY.

MCKEON: It is. I'm sad to go.

K DUFFIN: I know. We're bummed about this. But there is one thing we want you to do before you leave us, and that is answer a listener question that I believe you are the most qualified person to answer.

MCKEON: Yes. As senior Generation Z correspondent, I am here and ready to answer your question.

K DUFFIN: All right. Us older people thank you.


K DUFFIN: OK, so the question comes from a listener in Florida named Rafael.

RAFAEL: How do money transfer apps like Cash Out, Venmo and Square generate revenue if they don't charge for their services?

K DUFFIN: OK, so Rafael is asking about apps like Venmo - is probably the most popular one right now. So maybe let's start with, what is Venmo?

MCKEON: Venmo is just an app that lets you send money to your friends. And unlike something like PayPal, Venmo has, like, a feed where you can describe the payments you're making, and then all your friends can see them, and so it starts to look like a little Twitter feed.

K DUFFIN: OK, so that's Venmo. How do they earn money?

MCKEON: So I did some research, and I talked to someone at Venmo. And basically, the first way involves taking all of the money that I have on Venmo, that you have on Venmo, that anyone who puts their money on Venmo - taking all that money, putting it in a pile and then collecting the interest on it and investing it.


MCKEON: That's one way Venmo makes money. Another way is there are these small fees you can pay for certain upgrades. One is if you want to transfer money to your bank more quickly, they charge a fee.


MCKEON: Another is if you want to use a credit card on Venmo, they charge a fee for that, too.

K DUFFIN: OK, that makes sense. A lot of companies like them do that kind of thing to earn money. But I noticed, also - so I have Uber. And now, when I go to take an Uber, I can pay with Venmo.

MCKEON: Right.

K DUFFIN: Are they earning money off of that?

MCKEON: They are. What Venmo has started to do is they've approached retailers and said, look, Uber, look, Grubhub, if you let people pay with Venmo, you will have access to all of these young people with disposable income. And if you let us process those payments, we'll just charge a small fee.

K DUFFIN: OK, so Venmo gets money, and these retailers get young, hip people like you.

MCKEON: Exactly.

K DUFFIN: OK, cool.

MCKEON: You flatter me.


K DUFFIN: Well, it's our parting gift. Thanks, Shane.

MCKEON: Thank you, Karen.




GOLDMARK: I have a listener question for you.

K DUFFIN: You do?


K DUFFIN: That's great because we're doing a listener question show.

GOLDMARK: I come prepared. My question comes from Anthony Alizondo, and it has to do with the Federal Reserve and interest rates. So the Federal Reserve is the central bank of the United States. And the target interest rate ranges that it sets - it's like the throttle for the American economy. You want to slow the economy a bit? Then you raise interest rates a little bit. You want to boost the economy? Then drop the rates, make it cheaper to borrow money. Economy grows faster. But when they do this and they change the target range for interest rates, they always do it in increments of 0.25 percent.

So Anthony Alizondo - his question was, why did they always do it in increments of 0.25 percent? I mean, even when the Federal Reserve has made huge moves, like during the financial crisis, they did it with 0.5 percent or a clean 1 percent - always increments of 0.25.

K DUFFIN: Right. Because we live in this super precise world. So why are we still moving this really important number in these chunky 0.25 increments?

GOLDMARK: And nobody in the office knew off the top of their head, so I called up Donald Kohn, who is now a senior fellow at the Brookings Institution. But before that...

DONALD KOHN: I worked at the Federal Reserve for 40 years.

GOLDMARK: But he says there wasn't any specific moment or decision that made 0.25 percent become the number.

KOHN: I think - and you challenged my memory when your email came yesterday. But I believe when I started in the 1970s, the federal funds rate was quoted in eighths and quarters and halves and five-eighths, et cetera.

GOLDMARK: It's just easier to talk that way as people, right? You work at a bank, you call up another bank, and you say, hey, I want to borrow some money from you at 2 1/4 percent or 2 1/2 percent.

K DUFFIN: Right. Like, I'm not going to ask you for 0.43 of a doughnut. I'm going to ask you for a half a doughnut, or if I'm being good, a quarter of a doughnut.

KOHN: So a quarter point is, obviously, two-eighths. It's a nice, round number. I think it's also large enough to matter. So it's a non-trivial change in interest rates, but it's not huge.

GOLDMARK: 0.25 percent is like a Goldilocks kind of number. But he also says what's important is not the exact range that the Federal Reserve sets, it's whether the range is going to go up or going to go down. It's the direction. That is the signal that matters the most for the economy.

But right here - this is where I'm with our listener. If this target rate is so important, shouldn't the Federal Reserve be more precise and not less? So I pushed Donald on this a little bit.

Did anybody in any of those meetings ever say, hey, guys, let's just try 0.62?



KOHN: Not that I can remember.

GOLDMARK: What would've happened if somebody said that?

KOHN: Well, someone - I think someone would've said, but that's not the way the market works. And why would we go ahead and do that? So I think you need a reason to deviate from what you've been doing all along.

GOLDMARK: And holding steady, looking measured and consistent is very important for a central bank.

K DUFFIN: All right. Thanks, Alex.

GOLDMARK: You got it.


K DUFFIN: If you have questions, please send them our way. As you can tell, we do read them. You can reach out to us on email - planetmoney@npr.org. We are also on Twitter, Instagram, Facebook - @planetmoney. Today's show was produced by Alexi Horowitz-Ghazi and Sally Helm. Our supervising producer is Alex Goldmark. Our editor is Bryant Urstadt. I am Karen Duffin. Thanks for listening.


K DUFFIN: All right, we're going to sneak in one last quick question.




K DUFFIN: Do you want to introduce yourself?

M DUFFIN: Sure. I am your identical twin sister, Marie Duffin.

K DUFFIN: I got a question that I think you might be the most qualified to answer.

M DUFFIN: OK, go on.

K DUFFIN: We get lots of this kind of mail from men and women writing in to let us know that they do not like the voices of specifically the women on the show. We sound like Valley girls. Other people think we sound too throaty.

And I recently got one from a listener who I'm going to call Amelia. And this one caught my eye because she posed a question in it, which I don't think she meant it to be, but it's actually kind of a legitimate question. And I thought that my twin sister could answer it for her.

She said that my intonation makes me sound uncertain of myself and that when I introduce myself, it sounds as if I'm asking a question. Like, I am Karen Duffin?

M DUFFIN: Well, the legal documents do indicate that you are definitely Karen Duffin, but I can't say for sure that you are.


M DUFFIN: Because when we were born, Mom and Dad didn't name us right away, so we just had wristbands that said baby girl No. 1 and baby girl No. 2. So you might be Marie Duffin.

K DUFFIN: So Amelia's on to something.

M DUFFIN: I know. Amelia thought she was just giving a little bit of advice. But really, she's uncovered a bigger mystery. This is, like, the next Serial.

K DUFFIN: Next on Serial, I am Karen Duffin?


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