Am I A Job Creator?

Am I A Job Creator?

We’ve heard the talking point from the politicians. Raise taxes on anyone making more than $250,000 and you’re taxing job creators. As a result, raising taxes on the wealthy hurts jobs.

Yes, there are millions of small businesses Americans who make over $250k a year and create jobs, but what about people like me? We’re not small business owners. My wife and I are both employed by a company, but we’re constantly referred to as job creators. Do we really create jobs?

We eat out, we have housekeepers, a landscaper, someone to maintain our pool, and we hire a tax accountant. We also have the luxury of affording summer programs for the kids and the ability to buy things new (i.e. furniture). We also invest and save a significant amount of our income.

Jobs are created when money is spent or invested. This fact alone is reason to believe that the rich likely create more jobs than the poor through an increased demand for good and services. This may not be the case for everyone, but it is a fact that, on average, the wealthy do consume more products and services than the average Joe.

There are incredible amounts of money in the hands of the wealthy. Don’t get me wrong. I get that the ultra-wealthy invest large sums of money overseas, and can probably bear a few percentage point increase in taxes, but they consume and invest more than non-wealthy individuals.

What I’m talking about here is not the ultra-wealthy, but 4-person families who didn’t accumulate much just yet, but make around $250,000 a year living in a high cost of living area.

What about us?

Personally speaking, we likely created more jobs than we would have if we were not in the 1 percent. If we were not in the 1 percent, we would likely reconsider sending our son to a summer program. We’d probably search for used furniture on Craigslist. If our taxes went up by the 10’s of thousands of dollars, would we reconsider maintaining our pool ourselves? Probably. Would I consider maintaining my own lawn? Probably. Would we clean the house ourselves? Maybe.

Did we create jobs as we got wealthier? Maybe this post is my justification that we added a few.

About The Author

Edwin is a marketer, social media influencer and head writer here at I Am 1 Percent. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.


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53 Comments

  1. Daisy

    Interesting. But on the other side of the spectrum, you are taxed more, you give more money to the government, they use it on things like building infrastructure, which uses labor (and lots of it).

    Reply
    1. iam1percent

      Or they use it to send foreign aid to Pakistan and other countries…

      Reply
      1. so

        Foreign aid is such a tiny part of gov’t spending…1-2%, IIRC.

        Reply
        1. iam1percent

          2% of $4 trillion is a lot of freaking money…$80 billion to be exact.

          Reply
  2. krantcents

    To really create jobs in numbers that are meaningful, you need the middle class to start spending. Actually we need them to spend more!

    More taxes on the rich have unintended consequences! When you raise taxes, rich people can do something about it and usually do. Higher taxes never seem to result in the goals that are stated because of it.

    Reply
  3. Early Financial Freedom

    Today, I read an article about this topic: Millionaire taxes hurt the masses, from Newark to Paris (http://finance.fortune.cnn.com/2012/07/17/millionaire-taxes-fallout/?iid=SF_PF_Lead)

    My personal belief is that everyone (or every percentage) should pay their fair share, fair being the word. To your question, I would called it “contributor to new jobs” not “job creator” since they are not on your payroll.

    P.S. iam1percent – whenever you refer to the 1%, what exactly do you mean? (i.e., Total Income or AGI or Taxable Income?)

    Reply
    1. iam1percent

      Total income is what I refer to….

      Reply
  4. Gfunk

    Don’t forget that the rich also pay more sales tax! In places like San Francisco and Chicago it is upwards of 10%!

    Reply
  5. becca

    Gfunk- that’s not actually true in many contexts. In general, sales tax is regressive- it hits lower income people harder. It may depend partially on whether food and such are taxed (food is taxed in Chicago; soda is taxed extra).

    If your income is above 250,000/year the question isn’t whether you consume “more than the average joe”. The question is whether you consume more than 10 people at 25,000/year, who will spend the vast majority of their incomes. And the answer, simply, is no.

    When you invest money, you want it back. With interest (thus why it’s “investment” not “charity”). Sure, there are some jobs in banking to look after it for you, but the simple mathematics dictates that investment is inferior to consumption for economic stimulus. For example, food stamps have a higher ROI than taxcuts.

    Poorer people spend money more quickly, as a rule of thumb. Money changing hands is economic momentum. Good capitalistic companies take that momentum and turn a profit. If you have any of your money invested in stocks at all, you’ll probably actually be better off if you’re taxed more, IF that tax money is actually placed where it’s effective for the economy as a whole. However, if you’re not very perceptive you might just that you’ll think it’s the companies you have to thank and not those that are forming the consumption base of their profits.

    Reply
    1. iam1percent

      So your plan is to reduce average income to $25k and put everyone on food stamps? Laughable.

      Why don’t you take it a step further. Do you think a person making $25k consumes more than 2 people at $12.5k? IF that’s the case, we should raise taxes on people making $25k as well.

      Its also painfully obvious you have no idea how a bank makes money. They don’t just watch it. They take your money, loan it out to new business or invest it in businesses.

      Reply
      1. Shape

        “So your plan is to reduce average income to $25k and put everyone on food stamps? ” . . . “Do you think a person making $25k consumes more than 2 people at $12.5k? IF that’s the case, we should raise taxes on people making $25k as well.”

        This argument is a pretty textbook example of reducing the argument to the absurd. Becca was just using $25,000 / year as an example. Nowhere does it say that she want $25k to be the average income or have everyone on food stamps. It’s painfully obvious that you lack a basic grasp of logic.

        Reply
        1. iam1percent

          So, what was her point with the example? Please explain.

          Reply
          1. Shape

            Luckily, you are both arguing the same thing, “consumer spending drives the economy”, and therefore we can skip the “What comes first, Demand or Supply?” argument. Becca is addressing some comments you made in your article, primarily the following:

            “Jobs are created when money is spent or invested. This fact alone is reason to believe that the rich likely create more jobs than the poor through an increased demand for good and services.”

            First, this quote reads like it is part of a badly written LSAT Logical reasoning question.

            Second, no one here would argue against the fact that if you consider each individual person, then a single wealthy person would spend more money than a single poor person.

            But, becca is stating the individual doesn’t matter, it is the group. The poor as a group spend more money in the consumer market than the rich do as a group. There are also magnitudes more poor than rich. Therefore, if we are just looking as spending money in the consumer market, then the poor create more jobs.

            Every person has an amount of money required to meet the basic needs (food, water, shelter, etc.). For simplicity, we can overlook the living wage, which considers variable housing costs, and just look at the Federal Poverty Limit.

            In your article above you used the example of a 4-person family with an income of $250,000 / year. The federal poverty amount for a 4-person family is $23,050. For all filers, $20,000 – $30,000 income represents about 11% of the tax paying population (would be about 6% of married people, with the actual amount somewhere between for this example i.e. single person with 3 dependents).

            You state that the $250,000 / year take home pay allows you to pay for these jobs others cannot afford (maid, poolcare, landscaper, tax accountant, etc.), thus you are supporting and creating jobs by spending more money in the consumer market.

            If you make $250,000 a year, then maybe you spend $150,000 / year in the consumer market (food, clothing, services, entertainment, house, car, etc) and $100,000 is put into investments (401k, stocks, bonds, cd’s, anything not in the consumer market). The actual split here does not matter.

            Now, 10 families of 4, each making $23,050 / year, would probably have to spend ALL of their money to survive. Think about food, housing, transportation, communication, medical, school, clothing, etc for 4 people. With these expenses there would be very little, if any, of the $23,050 remaining.

            These 10 families add $230,500 to the consumer market vs the $150,000 example above. If you have 11 families, then they spend $253,550 into the consumer market, more that the 1 wealthy family above. Remember, we are talking about the lowest group here, the poor. If you look at the bottom 50% or the bottom 75%, then the amount of money spent in the consumer market would crush the amount the rich spend in the consumer market.

            If a very cheap apartment is $350 / month and a million dollar house is $4000 / month, then 12 people will beat you. Say it costs $200 / month to eat super cheap ($2.22 per meal). Do you spend $2,000 / month on food ($22.22 / meal)? If not, then 10 people beat your spending. For every single rich person how many poor are there? What category in the consumer market, especially for soft goods, would the 1% beat the bottom 30% or 50% as a group? Plane and opera tickets?

            The point with this example is in terms of total expenditure in the consumer market, there is no way for the top 1.5 million people to compete with the bottom 99%, or 75%, or even the bottom 30% (42 million people). The bottom 30% already has a 28 to 1 advantage. The numbers are just too big vs the expense for meeting the basic needs.

            And now this statement from your article: “My wife and I are both employed by a company, but we’re constantly referred to as job creators. Do we really create jobs?”

            Yes, you do create jobs, but so do the millions of other Americans that spend money. You are not the ones in the 1% who are “constantly referred to as job creators.” They are referring to the business owners or wealthy investors. In fact, I would argue that out of the types of 1%’ers, you are the ones that create the least jobs, could have taxes increased the most, and affect the job market the least, if at all. Maybe even help it actually. But, I really do not know if you are trying to convince yourself or us that you, a well paid company employee, is a job creator.

            If you want to look for job creators, then entrepreneurs account for 65% of all job creation and about 50% of the population works for a small business. The 1% represents about 1.4 million tax filers but there are 27 million businesses in the United States (for comparison the NYSE and NASDAQ combine represent about 6,400 companies). There are many business owners who are not 1%, but they create many full-time jobs. As a former and future business owner, I have personally met many of them employing 3-30 full-time people. They are the job creators.

            These are very basic economic lessons and arguments here. What baffles me is why you are even trying to make this argument. It shows you do not understand the 1%’s position in the economy. Consumer spending is never part of the argument for the 1%’s ability to create jobs, nor is it a solid argument for economic recovery or job creation.

          2. iam1percent

            Wow, that much text to make your point?

            Yes, spending was never the point, but its part of the point. Remember the tax Clinton imposed on luxury goods in the 1990’s? If you recall becuase of the lack of spending on luxury goods, middle class jobs were hit so the tax was repealed. In addition to other factors, spending is a part of the argument.

            So it seems that what you’re saying is that the most efficient economy is to get everyone to a place where no one has too much excess income and no one is in a position where they can’t purchase all of the essentials. We need to get everyone to a place where we are all able to spend on essentials and give up the rest. I think they called that socialism.

          3. Shape

            – – – – – “Wow, that much text to make your point?”

            No, very little of the text was to make my point. Most of it was explaining becca’s point, which I hoped if I broke it down a lot you would get. In addition, now you seem to think that if I discuss or explain a concept, then that is the economic belief I hold. I was originally just responding to your straw man response to becca.

            – – – – – “Remember the tax Clinton imposed on luxury goods in the 1990′s?”

            No, because Clinton did not issue a tax on Luxury goods.

            – – – – – “If you recall because of the lack of spending on luxury goods, middle class jobs were hit so the tax was repealed.”

            You are assuming the wealthy are the ones buying the luxury goods. You already discussed the Millionaire Next Door in another article, and one of the main points of the book is the wealthy do not buy the status symbols (i.e. luxury goods). Most people driving a Mercedes or BMW are in debt on that car; vehicles covered by the luxury tax.

            – – – – – “In addition to other factors, spending is a part of the argument.”

            I never said spending was the only factor, which is why I said we could skip the “What comes first, Demand or Supply?” argument at the beginning of my previous post. I do not want to go into that argument with you because you cannot even grasp the concepts on one side, much less be able to discuss both sides. “SO” tried to in his posts, but you clearly do not get it.

            Besides, if you want to say you are a job creator as a 1%’er, then you should be arguing the other points to begin with, not the fact that you have a maid or pool man.

            – – – – – “So it seems that what you’re saying is that the most efficient economy is to get everyone to a place where no one has too much excess income and no one is in a position where they can’t purchase all of the essentials. We need to get everyone to a place where we are all able to spend on essentials and give up the rest.”

            Please show me where I said no one should be in the 1%, that people should not be wealthy, incomes should be equalized, or that life should be fair to everyone? Is your only way of arguing to make a straw man?

            Do keep in mind saying that the poor spend more money than the 1% in the consumer market is not the same as saying “there should be no rich.” In fact, it is not even close to the same thing.

            Also, the original discussion was, “Who creates more jobs by spending money in the consumer market,” not “What should we do to create jobs.” Again, significant difference, which so far you have show an inability to grasp.

            – – – – – “I think they called that socialism.”

            I am not arguing for socialism, but you do know the NFL is socialist and look how well that works? You know what else is socialist? Public schools. Socialism is not what it has been made out to be, nor should the socialist programs in the US or modern Europe be compared to the violent, socialist regimes of the past (or present) in the Soviet Union, China, Cuba, Korea, Vietnam, etc.

        2. Philly area

          Do $25k households create jobs? Absolutely! However, a great deal of their job creating spending comes right out of the taxpayers’ pockets. A family of four here in the Philadelphia area earning $25k gets food stamps, heating assistance, free or low cost day care and the kids get free medical care all while paying absolutely NO income taxes. I’m not arguing they shouldn’t get those things, I’m saying it’s disingenuous to state they have a more positive impact on job creation when people in the top half income wise are actually paying for a good deal of the poor’s job creation.

          Meanwhile a family earning 250k pays for all that stuff out of their own pockets and probably pays 40% or so (about $100k) in taxes (ss, fed, state, city, etc.).

          Reply
          1. Jon

            Shape- Elegantly said. I stumbled upon this blog looking for information on just what percentage of the wealthy are truly job creators. As I was reading I couldn’t help but think about how out of touch the author was regarding the potential impact the poor and middle class has on the economy compared to the wealthy. This argument that increasing taxes on the wealthy kills jobs has always bothered me. It just doesn’t hold water. If I’m a business owner and sales are sluggish because the economy is in the tank or just not recovering as quickly as we hoped, I’m not going to increase my payroll because I got a break in taxes. It’s demand that drives job creation. And how better to increase demand than put more money in the pockets of the real economic power- the 99%.

          2. iam1percent

            You are assuming that the argument is that a business is looking to hire if sales are sluggish. If you look at the facts, corporate profits are high. Companies are sitting on more cash (>$2 trillion) than they ever have in history. Retail and food sales have steadily been increasing (http://www.census.gov/retail/#mrts). The stock market, which reflects the health of public corporations hit a 5 year high on Friday.

            Companies can hire, but there are a few uncertainities in this economy.

            1. Taxes – the president has called for higher individual tax rates and has not championed lowering corporate tax rates
            2. Healthcare – no one knows what the impact of ACA will be. If a company has 49 employees and offers no health benefits, the cost of hiring 1 more person is extremely high with the law requiring companies with >50 employees to provide healthcare coverage.

          3. Jon

            I only just realized you replied to my comment.

            No, I’m assuming just the opposite. Businesses would NOT be looking to hire when sales are sluggish. Republicans are maintaining that an increase in taxes on the 1 percenters, the “job creators”, is going to hurt the economy because they will be less likely to create jobs – therefor, keeping taxes low for businesses promotes job creation. Businesses will hire when there is more demand for their products or services. They’re not going to increase their payroll just because their taxes are low.

            Shape’s point hits the nail on the head. The real economic power lies with the middle class and working poor, not you and the 1%. When they spend the economy booms. What is hurting the economy today is the marginalization of the middle class.

            Sure there are always uncertainties that affect companies decisions to hire but we’re specifically talking about income tax rates here. So let’s put more money in the hand of the masses instead of the few (by increasing the minimum wage for starters). They will spend it, businesses will see increased profits and increase payroll to meet the greater demand.

          4. iam1percent

            This is false. Any CFO will tell you that most major corporations are always want to hire more full time employees (FTEs). However, they balance and allocate FTEs while trying to reach a profit margin acceptable to shareholders. Taxes eat into that profit margin. Case closed.

    2. Virginia

      Becca – Smart response. “Like”

      The first couple dollars a person makes are more likely to go towards consumption (food, housing, clothes). Once a person reaches a certain point in income, their consumption may still increase as their income increases but it does so more slowly. Now they aren’t spending every dollar. Some of them are being invested in low growth things. Not every dollar that is invested is efficiently used.

      Reply
      1. so

        You’re on it. There is much less consumption as a % of income after a certain point.

        Reply
      2. Shape

        That is an excellent way to explain that concept.

        Reply
  6. C

    When people talk about job creation, I’m pretty sure maintaining your pool and mowing your lawn and taking care of your spoilt children is not what people have in mind.

    Reply
    1. iam1percent

      Tell that to your leader. Obama feels that we create jobs though an increased demands for goods and services. So my purchase of goods and services drive job creation.

      Reply
      1. C

        Shitty job creation. You must be so proud.

        Because I’m sure you’d love to maintain a pool, scrub a toilet, and take care of other people’s brats.

        Oh wait, no you don’t. You create jobs that you yourself would not do. How nice.

        At least people who run businesses create jobs somewhat similar to theirs. All you do is put yourself above others.

        Reply
        1. tom

          How is hiring anyone to do anything putting yourself above others?

          If people didn’t hire people to do tasks, half the nation would be unemployed.

          Reply
    2. tom

      Actually, that’s exactly what he had in mind.

      When you purchase goods and services, even lawn mowing, pool maintenance and “spoilt” childcare, it creates AND MAINTAINS jobs.

      Without his, and others like him, money all those people would be out of work.

      Reply
      1. C

        Did you ever think they might not be out of work? Maybe they’d find something better than scrubbing this person’s toilet.

        Reply
        1. tom

          Why couldn’t they be searching for better work while doing these jobs to get by?

          Not everyone is as fortunate to have a free roof over their head as you are, C.

          Reply
  7. Bridget

    I agree! I can’t wait until I can create some jobs getting someone to clean my apartment lol

    Reply
    1. C

      Or you could clean your own home…who ever heard of doing THAT? What a strange idea.

      Reply
      1. iam1percent

        Or Bridget could spend more time with her family and keep someone employed in the process….what’s wrong with that?

        Reply
        1. C

          What’s wrong with cleaning up YOUR own mess that YOU made in YOUR house?

          Reply
          1. iam1percent

            Nothing wrong with it. I just prefer to use that time to do other more productive things.

          2. C

            Regardless of what you feel is productive, I think that anyone over the age of 5 should learn to clean up the messes they make. It’s called being an adult.

            Guess you haven’t quite gotten there yet, despite being in your 30s. Oh well, maybe next year.

  8. JL

    I would suspect that the people installing my new landscape, garage storage units and wood floors would prefer to receive their income through this work versus a government program. Note that the government also benefits in receiving taxes from the labor generated by these projects.

    Reply
    1. C

      Oh, I see.

      So the only options are: jobs like that and living off the government?

      Which one is you?

      Reply
      1. iam1percent

        Yes, you either work for yourself or find a way to leech of the government.

        Reply
        1. C

          So when will you be starting that toilet scrubbing job? After all, since you aren’t living off the government, you must be working a shitty job. Those are the only options, right?

          Reply
          1. iam1percent

            C, I think your blog should just be called “insanity” because you’re already insane with no end in sight.

          2. Back in School

            C, I really don’t understand your offense at holding jobs like babysitting and lawncare (or apparently heaven forbid – housekeeping) . I’ve done stints in the first two and there is decent money there if you’re willing to put in the time. I can’t say that I completely loved the jobs and wanted to do them every day for the rest of my life, but I was happy that I had them – and by proxy happy that there were people willing to pay me to do them.

            Out of the 6 guys I did lawncare with, just one other went back to school around the same time I did. The other 4 are currently still content working the seasonal jobs rather than searching for a new career or going back to school. And really, whats wrong with their choice?

            C, you clearly have never worked those “shitty jobs” as you called them, because anyone who looks down on those jobs so much clearly has no appreciation for the work or the people who do it; which btw, is way more insulting than someone paying me to do something they don’t feel like doing.

          3. Shape

            C,

            I get what you were trying to point out originally, that the article comes off as bragging instead of advice, but you lost it.

            Those “shitty” jobs, as you call them, can be good and make a lot of money. I personally use to do one of those “shitty” jobs and made a lot of money doing it. I also have met many people who quit their office, professional jobs to go do a “shitty” job such as landscaping, lawn care, or automotive detailing. They were all happier than before because they were in better shape, still made good money (they started the business as an owner/operator), and felt good about their work.

  9. Six figure investor

    Its unfortunate that our politics have evolved this far.

    What you get to keep of what you earn should have no strings.

    Its your property and you are entitled to keep all of it that isnt req to fund services.

    I dont care whether you create jobs its your property.

    Reply
    1. iam1percent

      Six figure, thank you so much for that note. You are absolutely correct. I have been blessed to be able to earn a significant income and I don’t have to justify how I spend it…its my property.

      Reply
  10. so

    “Jobs are created when money is spent or invested.”

    No. Spending does not presumptively create jobs on an individual level, don’t believe the hype. Did your tax accountant hire a junior because of the work you gave him? Do your housekeepers or other service providers materially rely on your business? Do you comprise even 5% of their total revenue? If not, you don’t consume enough to produce a single job on an individual level.

    Reply
    1. iam1percent

      A definitive no? Let’s then presume no money is spent..from anyone…on anything. I would thinks jobs would be lost…which leads me to believe why spending would create jobs.

      Reply
      1. so

        On an individual level, unless you have firm evidence that your spending created a job, no. You can’t factually support the “we likely created more jobs than if we weren’t in the top 1%” assertion unless you can answer the questions I set forth above in the affirmative.

        On an aggregate level, yes, there would be no jobs without consumption and demand. But a “job creator” is way different than a consumer, even a high-end consumer. You don’t have enough individual consumption and demand to create one job — MAYBE if you had a live-in nanny or something, but you have to be able to tie your spending / demand to an actual job created to be a job creator.

        Reply
  11. Shape

    You are also aware that the image you used for this article is mocking the very point you are trying to make?

    Reply
  12. Radguy

    I am a physician and like both you and your wife I work in the healthcare industry. I am also a 1%er based on income and net worth.

    My pay (and your wife’s) is in large part dependent on government reimbursement (medicare/medicaid payments and private insurers who base their payments as a percentage of Medicare usually). You work in pharmaceuticals and I’m sure your company needs Medicare dollars to be profitable and pay your salary.

    What people who work in healthcare need to realize is that government spending and taxes are critically important to their incomes. Medicare is a big contributor to the current and future budget crisis and so taxes have to go up in order to sustain it or it has to undergo significant cuts.

    Either way your family and mine are screwed either we pay more in taxes or federal programs get cut and we lose income. I know I make more from the government than I pay in taxes currently and I will happily pay 5-10% more in taxes to avoid a 30% cut in reimbursement (as is proposed in the SGR for Medicare).

    Smart doctors and other highly compensated healthcare workers KNOW the tea party and others who advocate for small government with less spending are our worst financial nightmare.

    2 cents from a 1%er

    Reply
    1. iam1percent

      14% of the federal budget is dedicated to Medicare. There is 86% of the federal budget that won’t affect our professions. With all due respect, to think that we can’t cut spending from the 86% is naive.

      Secondly, you can most certainly reduce Medicare spending and not affect physician reimbursement. Medicare pays much less than private insurance. A voucher program where citizens can use to purchase private insurance actually increases physician reimbursement with a costs savings to the federal goverment.

      Small government is a reality.

      Reply
  13. Catherine Shanahan

    A non-partisan Congressional research service produced a study that finds absolutely no correlation between the top tax rates and economic growth. In other words, lowering tax rates on the wealthy DOES NOT create jobs. Republicans DO NOT want you to see this study.

    http://www.dpcc.senate.gov/files/documents/CRSTaxesandtheEconomy%20Top%20Rates.pdf

    Conclusion:

    The top income tax rates have changed considerably since the end of World War II. Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%.

    Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The average tax rate faced by the top 0.01% of taxpayers was above 40% until

    the mid-1980s; today it is below 25%.

    Tax rates affecting taxpayers at the top of the income distribution are currently at their lowest levels since the end of the second World War.

    The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth.

    The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009.

    Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.

    (excerpt)

    Reply

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