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To: Haim R. Branisteanu who wrote (78734)	3/12/2001 9:21:24 AM
From: Don Lloyd	Read Replies (1) \| Respond to of 436258

Haim - ...what benefit will the real economy gain if the highest tax bracket get's most of the tax cut dollar?? ... Actually, likely a larger benefit than if it goes somewhere else. However, setting aside the question of level of benefit, it is easy to show that the tax cut dollar that goes to the highest bracket taxpayers does have a positive economic benefit to the overall economy. First, consider all the possible paths that the tax cut dollar can follow after being received by a top bracket taxpayer. 1. It can be spent. Since the marginal dollar spent by a high net worth individual is likely to be spent on much different products than is generally true, this contributes to a demand for an increased diversity of products in the economy. The production of these products will require the creation of new jobs, typically highly paid, and will generally increase real wages throughout the economy. 2. It can be saved or invested. The continuing production of existing products at lower prices and the creation of new products needs investments to create the means of ever more efficient production, also resulting in higher real wages. Only people with sufficient disposable income can provide the large savings and investments needed for an advanced economy to progress. 3. It can hoarded by stuffing it under the mattress. Even this seemingly useless action has possible benefits. First it may well represent future demand when and if it is recovered. Secondly, it serves to reduce the effective money supply, helping to offset in a small way the inflation generated by the central bank. In summary, the top bracket taxpayer has no way to prevent his tax cut dollar from benefiting the overall economy, other than by paying off politicians and bureaucrats to intervene in the economy. Regards, Don