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Old 04-14-2010, 11:57 AM   #121
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Looks like we had exemptions, edu credits, child care tax credits and child tax credits. There have been a couple of examples posted of households who end up paying very little or actually getting money back. One was ER50's example from an $84K household. The other was quoted example of a ~$50K family getting money back from the govt (see below).

There is the earned income tax credit which is also based on the number of children and is a big tax break for low-income households. For example, in 2009 there was a credit of up to $5,657 for 3 or more qualifying children in a joint married household making $48K or less. This is actually the main way so many households with children fall in the not paying FIT category. I think the $50K quoted example fell into this category.

I therefore retain my right to use the terms "HUGE" and "juicy" given that the deductions and CREDITS are large compared to what would otherwise be the tax liability in this income range, and more so for families with children than with those without.

Personally, I don't have a problem with it. That's the way our tax code is written, and the biggest way we address poverty in the US (rather than welfare), and I don't believe the tax code is deliberately abused by a large number of people opting to have a huge number of children to get the better of it. Of course there are exceptions, I just don't believe they are numerous enough to penalize all the other families with children.

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Old 04-14-2010, 12:23 PM   #122
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Originally Posted by audreyh1 View Post
Looks like we had exemptions,
NOT kid specific. I bet you took yourself as an exemption Audrey. Although, at 50 yo you're just a kid at heart I guess.
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edu credits,
not kid specific.
Quote:
child care tax credits
unfortunately phases out for middle class folks.
Quote:
and child tax credits.
Phases out. This is the one we just discussed.
Quote:
There have been a couple of examples posted of households who end up paying very little or actually getting money back. One was ER50's example from an $84K household.
That was ERD50's personal situation at his house. It included tax reductions other than kid-specific. But his point that our tax code is written so that relatively well off folks pay little tax is a good one and tweaks the thought process.
Quote:

I therefore retain my right to use the terms "HUGE" and "juicy" given that the deductions and CREDITS are large compared to what would otherwise be the tax liability in this income range, and more so for families with children than with those without.
Everything is relative. If you think it's "HUGE" then, by golly, it's "HUGE" to you!

Quote:
I don't believe the tax code is deliberately abused by a large number of people opting to have a huge number of children to get the better of it.
I agree with that. In fact, strictly from anecdotal examples and conversations with friends, I believe that non-kid related tax cheating is a bigger issue. I know that those stories of folks getting tax breaks from 18 kids stir the emotions. But gosh, those folks must live in Texas with Zig. I don't know anyone with 18 kids here. But everyone seems to have their favorite story of how they enhance something on sched A, declare residence in a no-tax state but don't really live there, don't declare money made on Ebay, and blaaah, blaaah, blaaah. Maybe it's just who I hang around with, but nobody here is ever boasting of how they're saving tax money by having 18 kids.

Now, getting back to business, I'm here at DS's home baby sitting 3 rugrats, 1 dog, 1 cat, 1 hamster and 5 tropical fish (unless another one died ) while DS and DIL are vacationing. (Am I a good grandpa or what?!?!) I looked at his taxes before he left and was shocked to see his bill similar to mine. Similar incomes but he has the 3 rugrats and I've been an empty nester for many years. I told him I'd figure out what he did wrong before electronically filing and then drove them to the airport.

Here I am, can't find a penny of "kid-savings" beyond the small child care credit he already has here.

With all this talk of "HUGE" savings, etc., you guys haven't been much help at all. Got me all excited. I thought this would be low hanging fruit. But nooooo.......

Maybe I should suggest they go "full time" and avoid state income tax and real estate tax and just home school the kids?

Oh well. I also promised to tune up his mower. Maybe I better go focus on that. It's going to need a "HUGE" amount of tuning up!
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Old 04-14-2010, 12:48 PM   #123
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[You left out the "juiciest" kid one - the earned income tax credit in your list - oh, I know, it doesn't apply to your son either - surprise!]

You can't find a lot of "kid savings" for your son because he and his wife make too much.

Just because a credit phases out above certain income levels, doesn't mean it's not "juicy" or "huge" for the lower income folks. It's deliberately designed to be that way.

You can alway opt to lower your income to qualify for more breaks and to pay less taxes overall. That option is available to everyone.

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Old 04-14-2010, 12:54 PM   #124
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With all this talk of "HUGE" savings, etc., you guys haven't been much help at all. Got me all excited. I thought this would be low hanging fruit. But nooooo.......

Maybe I should suggest they go "full time" and avoid state income tax and real estate tax and just home school the kids?

Oh well. I also promised to tune up his mower. Maybe I better go focus on that. It's going to need a "HUGE" amount of tuning up!
The credits were never designed to be HUGE for higher income taxpayers, though. But they can make a "huge" difference for less affluent families.
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Old 04-14-2010, 12:59 PM   #125
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Originally Posted by audreyh1 View Post
You left out the "juiciest" kid one - the earned income tax credit in your list -
That's not kid specific either. But I understand low income folks with dependents (kids or not) get more EIC than without dependents, everything else being equal.
Quote:
You can't find a lot of "kid savings" for your son because he and his wife make too much.
I agree Audrey. But I do think in the interest of fair representation, folks calling out kids as "HUGE" tax savings should specify that they mean huge as a percentage, not necessarily an absolute number, as middle class folks have most of these benefits phase out. But I know what ya mean. It's relatively speaking "HUGE" and possibly a significant percentage of a lower income family's tax bill.
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You can alway opt to lower your income qualify for more breaks and to pay less taxes overall. That option is available to everyone.
And that's certainly true. Not kid-specific, but true. Any of us who think we pay too much income tax can solve the problem by having less income.
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Old 04-14-2010, 01:10 PM   #126
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But I do think in the interest of fair representation, folks calling out kids as "HUGE" tax savings should specify that they mean huge as a percentage, not necessarily an absolute number, as middle class folks have most of these benefits phase out. But I know what ya mean. It's relatively speaking "HUGE"
Since I was specifically listing the likely groups making up the population who pay very little or no FIT in any given year due to having low incomes, I believe I had already made that qualification.

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Old 04-14-2010, 01:16 PM   #127
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The credits were never designed to be HUGE for higher income taxpayers, though. But they can make a "huge" difference for less affluent families.
I agree. And I understand now that I've wasted a morning (where I could have been in the garage tuning the mower - the kids will be home soon and there will be no mower tuning then! ) playing around with TurboTax looking for kiddie related tax breaks that don't exist for middle class filers.

Sigh......

Kiddie tax breaks - much ado about nothing! Although as Audrey said, if the lower income folks receiving them benefit in a way that improves the lives of the kids in a meaningful way, it's a good thing I guess, even if it doesn't apply in my family.
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Old 04-14-2010, 01:23 PM   #128
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Since I was specifically listing the likely groups making up the population who pay very little or no FIT in any given year due to having low incomes, I believe I had already made that qualification.

Audrey
Fair enough. Understand, with folks mentioning 'HUGE" juicy tax breaks for the kiddies, I was chomping at the bit to rake some in for youbet jr. I understand now. We're not talking about "HUGE" absolute dollars. We're talking about "HUGE" percentage tax savings for low income filers.

Gothcha...... But damn, what a disappointment.
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Old 04-14-2010, 02:07 PM   #129
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I'm generally of the view that incentives matter and that people will be more willing to vote for programs if the taxes needed to support those programs are paid by someone else. But I also think this point can be, and often is, overstated. People are not always economically rational. I'm reminded of an unpublished paper Larry Summers reportedly wrote against the "rational expectations theory" in economics. He began . . . "THERE ARE IDIOTS! Look around."

Indeed, there are countless examples of people who seem to vote against their economic self-interest. A quick look at the political map shows many rich states that reliably vote Democratic and many poor states that reliably vote Republican. These people are clearly not voting on tax / benefit issues alone, or even primarily, otherwise the political map would look different.

Here's a site where you can see that visually. The attached screen shot is the traditional "Red / Blue" map by voting district but filtered to show only the counties with the lowest income. There is a lot of Red on that map.
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Old 04-14-2010, 03:25 PM   #130
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Absolutely. If everyone had to write a check at the end of the year to pay for the cost of their government, people would think harder before voting for benefit increases (or foreign wars, or tax cuts for those with the highest incomes).
Simple solution to this

Move election day to May 1
or move tax day to October 15.
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Old 04-14-2010, 03:31 PM   #131
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True, and a good point, IMO.

But if everyone had skin in the game, maybe there would be enough critical mass of votes to make a difference?

-ERD50
I think the point of the post being replied to was that paying taxes is not "skin in the game".

Whether someone pays a high amount of taxes or low amount of taxes may not change their political views. One of the richest friends I have (a surgeon) is the most liberal person I know as far as politics go.

Not everyone votes based on taxes or more government/less government.
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Old 04-14-2010, 03:39 PM   #132
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The question isn't one of direct control of representatives but rather which ones you vote for. Being a tax *payer* instead of only a tax *consumer* means you are more likely to vote for the "fiscal sanity" candidate instead of the "free lunch" candidate. Too many people get elected by promising a lot of people something for "nothing."

So if everyone realized the lunch wasn't free and they knew *they* would be helping to pay for the programs they wanted, IMO that would be a good thing.
Respectfully disagree.

We are all tax consumers
Some consume more than others
Some contribute (pay more than others)... and some contribute nothing, which is the point of thread (would any of us lower income to pay nothing).

but to lump people in one camp or other based on taxes paid (or not paying taxes) is a way to suggest "vote republican" IMO.

Examples- Clinton (either B or H) is a Democrat and I would vote for either one if they ran for President. They might tax more than McCain or Perot or Bush, but history showed that Bill can lead really well, and I believe Hillary would do just as good of a job. Should be noted I voted for Perot both times he ran (against Bill) but history has proven Bill to be a decent to above average President, IMO.

I do not see Obama the same way. Not a leader, not going to vote for him (EVER) and that has nothing to do with how much taxes I pay under one candidate or the other.


A candidate is more likely to lose votes by taking away a handout than to gain votes by promising more handouts (IMO). Social security is a prime example- if any candidate ran on SS reform, it would lose them more votes than they would gain- because anyone expecting a SS check would be nervous as to the uncertainty.
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Old 04-14-2010, 03:46 PM   #133
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Plus 1 to everything Leonidas posted, also -

Well, a little anecdotal evidence that could probably be backed up by some study/survey (maybe the Freakonomics guys?):

I recall a company picnic that offered free hot dogs. The organizers were appalled at the waste. Then they switched to charging a token amount (10 cents, 25 cents or something), and the waste went way down. So in this case, a token amount did make a big difference in behaviors.

I don't know if it would help in politics, but I tend to think so. And we might actually get a better selection of candidates (or better behavior from the current ones), if they knew the majority of their constituents actually cared about fiscal responsibility because they now had some 'skin in the game'.

-ERD50
Comparing politics to hot dogs...
would you run for office on this platform?

In fairness, when we coached soccer, we NEVER gave anyone anything for free- even if a tournament (fundraiser) paid the bill, we would charge players $5 or $10 for extra training, just to confirm the signups and get the right resources (number of trainers) ahead of time.
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Old 04-14-2010, 03:56 PM   #134
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Fair enough. Understand, with folks mentioning 'HUGE" juicy tax breaks for the kiddies, I was chomping at the bit to rake some in for youbet jr. I understand now. We're not talking about "HUGE" absolute dollars. We're talking about "HUGE" percentage tax savings for low income filers.

Gothcha...... But damn, what a disappointment.
Don't give up yet Youbet. Can't you just make up a few of those traditional cheats your friends were bragging about.
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Old 04-14-2010, 03:58 PM   #135
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It's kinda like school taxes for me. I have no children. So why do I have to pay school taxes? If someone can ever logically explain this to me, I'm all ears.
I get steamed about school taxes because I actually had to set up a special bond fund to provide top cover for this extremely high involuntary expense in my FIRE budget. I don't mind paying county property taxes because I am the recipient of county services (road plowing, waste management, LE, emergency services, etc).
But what do I get for my school taxes? Nada.

End of rant.
I disagree on the school taxes only for those with kids in schools for 4 main reasons

1) If you own property, your property value is a function of the value of those properties around you.
2) If you own property, your property value is set to be within a given school district
3) People will pay a premium on a property (value) to be in a given school district
4) The property value will change based on quality of school district changing

Meaning- if you do nothing to property (other than mow lawn), but school district goes to crappers, your property lost value. The opposite is also true, if the school district improves, your property value goes up. If I pay school taxes and you do not, and my school taxes raise the value of your property, I want you to pay that tax too.

You don't have to agree with me, that is the logic I use to justify why everyone within a given school district pays school taxes.


Some communities within Ohio have passed "move in taxes" which means the people which buy property pay a tax the existing homeowners do not have to pay. Its was there way of not raising property taxes on the whole community. This works best if the community is "underdeveloped" land wise I think.
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Old 04-14-2010, 04:24 PM   #136
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But I also think this point can be, and often is, overstated. People are not always economically rational. I'm reminded of an unpublished paper Larry Summers reportedly wrote against the "rational expectations theory" in economics. He began . . . "THERE ARE IDIOTS! Look around."
I wonder what Summers would say about guys like this:

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One of the richest friends I have (a surgeon) is the most liberal person I know as far as politics go. Not everyone votes based on taxes or more government/less government.
Either the people in both cases are idiots for voting against their economic self-interest, or they are basing their political beliefs on something else.

While pondering this, I cruised the net looking for views on "why poor people vote Republican". Among the finds were two stories by Brit political scientists (one for BBC and the other, a black man, for the Guardian - self-described as a platform for left-wing opinion). It's interesting to see how outsiders view this issue: From David Runciman, a UK political scientist VIA the BBC:
Quote:
If people vote against their own interests, it is not because they do not understand what is in their interest or have not yet had it properly explained to them.

They do it because they resent having their interests decided for them by politicians who think they know best.

There is nothing voters hate more than having things explained to them as though they were idiots.

As the saying goes, in politics, when you are explaining, you are losing. And that makes anything as complex or as messy as healthcare reform a very hard sell.

This is a culture war but it is not simply being driven by differences over abortion, or religion, or patriotism. And it is not simply Red states vs. Blue states any more. It is a war on the entire political culture, on the arrogance of politicians, on their slipperiness and lack of principle, on their endless deal making and compromises.

And when the politicians say to the people protesting: 'But we're doing this for you', that just makes it worse. In fact, that seems to be what makes them angriest of all.
And from Gary Younge at the Guardian (written in 2006):
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In his book What's The Matter With Kansas?, Thomas Frank described the tendency of working-class people to vote Republican as a form of derangement. He said that the working class had been hoodwinked into voting against its economic interests by "values" issues such as abortion and gay rights.

There were two main problems with this argument. First, it suggested that poor people are incapable of working out what's best for them. Second, it gave undue emphasis to economic interests, as if they should always take primacy at the ballot box. My guess is that Frank, along with many readers of this paper, vote against their economic interests when they vote for a government that will raise taxes and redistribute wealth. It doesn't follow that, because poor people also put different priorities (opposing gay marriage or abortion) with which we disagree ahead of financial wellbeing, we are principled and they are patsies.

...In other words there is a clear racial attachment that white voters have to the Republican party that does not override income but certainly qualifies it. No understanding of why so many of them vote Republican can examine class as though it is distinct from race.

Second, they assume a greater class attachment to the Democrats than the party deserves. Unlike the Republicans, who openly lobby for the class interests of their supporters and deliver on them, Democrats do not promise substantial changes to the lives of ordinary working people in America and rarely deliver even on the symbolic ones.

Which brings us to the final problem. The strongest correlation between income and voting is not whom you vote for but if you vote at all. The more you earn, the more likely you are to turn out. According to the census, 81.3% of those who earned $100,000 or more turned out in 2004; the figure for those who earned less than $20,000 was 48%.

That's because the rich have something to vote for. They have two parties; the poor here have none. Ultimately, the question of what's the matter with Kansas or any other state must in no small part be answered by yet another one: what's the matter with Democrats?
BBC News - Why do people vote against their own interests?

What's the Matter with Voting Republican If You're Poor?
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Old 04-14-2010, 04:43 PM   #137
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Other than child care credits, which phase out with income, what "per child" tax credits are you referring to?
EIC has kids attached to it
Child tax credits
Additional child tax credits (you cannot take both, but this one is refundable, other is non refundable).
Additional exemptions

edit to add
child care tax credit
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Old 04-14-2010, 04:49 PM   #138
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I see many issues going in a few different directions...

here are some direct opinions of my own, which I have not seen directly articulated (yet):

1) Property taxes are a method of social engineering. Meaning we choose to live in a place with similar people and much of this is controlled (or influenced?) by property taxes. If property taxes were removed, what would stop the gangs in LA from moving to Beverly Hills? The property tax is way of "funding" the police protection, the schools and the "social" climate of the area.

In addition, if the people which used the schools paid for the schools (and not the land owners pay for the schools), then what happens if a person is too poor to pay? Now the government is mandating education, requiring everyone to pay for it (even renters) and then this resembles the health care debate to me (I have to go to school and pay for it, I have to have health care and pay for it)


2) The demographics of who does not pay FIT (the 47%) is too diverse, and is not a "majority" in too many senses of the word. What I mean by this, is its not like 75% of the 47% are african americans, its not that 66% of the 47% are inner city folks, its not that 52% of the 47% are anything other than American citizens (and they are American taxpayers).

3) One of my favorite concepts is "the absence of data is not data itself". What I mean by this is you cannot correlate the voting behavior of the 47% which do not pay FIT to voting for (liberals) which keep them in office. If anything I would believe its the other way around- once elected, a person will recognize their constituency and try to support or deny programs to keep themselves in office... so if a Democrat has to turn republican to stay in office, or a republican has to turn democrat to stay in office, that trumps people (voters) voting based on whether they receive a handout or not. Once a person is elected, they will keep their constituents happy, and whether they "support" handouts is more a function of their constituents than their actual personal beliefs.

4) Those which live in good school districts should be able to sell houses "quickly" relative to lower priced/lower school tax markets. I have a friend which sends kids to private schools, but he lives in a high tax area (he pays double the taxes I do). In the most recent real estate issues our areas had, two things held true- his property value did not fluctuate as much as mine did, and the houses in his neighborhood sell faster- to extent some houses sell within 48-96 hours of being put on market (still). If school taxes are high, but the schools are not "as good" as other areas, that is a different problem.
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Old 04-14-2010, 05:01 PM   #139
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I disagree on the school taxes only for those with kids in schools for 4 main reasons

1) If you own property, your property value is a function of the value of those properties around you.
2) If you own property, your property value is set to be within a given school district
3) People will pay a premium on a property (value) to be in a given school district
4) The property value will change based on quality of school district changing

Meaning- if you do nothing to property (other than mow lawn), but school district goes to crappers, your property lost value. The opposite is also true, if the school district improves, your property value goes up. If I pay school taxes and you do not, and my school taxes raise the value of your property, I want you to pay that tax too.
I disagree.

(1) My property is a studio apartment in a large co-op complex, a complex which consists of mostly childfree residents. The value of my apartment is based a lot on the value of other apartments in my complex and in nearby co-ops, places which are also mostly childfree.

(2) People who buy apartments in these co-ops have no desire to pay a premium for something (i.e. schools) they have no plans to use.

(3) I bought my apartment back in 1989. This was just before the real estate market tanked in the early 1990s. If I sold my place in the early 1990 I would have lost nearly 50% of what I paid. The schools were not going down the drain at any point. But things rebounded over the years, and not because of anything special in the schools (in fact we had some exam grading scandals in the late 1990s). The high level of the school taxes is a constant drag on the sales price here the same way high interest rates are a drag on home sales - it increases the carrying costs of owning a place. Nearly nobody in my complex gains from having good schools but we are all penalized by having high local school taxes. Declining school quality would have no effect on anyone in my complex trying to sell because the new buyer(s) will be similarly childfree, the same way I did not give a damn about the quality of the schools when I bought my apartment.

(4) I said it before, but paying a premium for something you can't use is not limited to just schools. Our co-op is located close to the local commuter train station, something valuable to me and many others who use it. Someone who moves here but doesn't use the train is paying a premium for something they can't use (or they live someplace away from the station). But with schools we can't as easily avoid paying a premium if we have no kids.

I don't suggest we childfree pay zero local school taxes but we should receive a no-kids property tax credit the same way income tax filers receive per-kids tax credits.
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Old 04-14-2010, 05:13 PM   #140
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Originally Posted by Leonidas View Post
Either the people in both cases are idiots for voting against their economic self-interest, or they are basing their political beliefs on something else.
I think in a lot of cases its the "something else" that matters. Economic issues are not the be-all, end-all. Many people choose political parties because of non-economic issues that are important to them . . . cultural, religious, etc.

I also seem to detect a phenomenon where people join a group for one reason (say religious) but then adopt the groups other views (economic) that are of secondary, or tertiary importance to them. I think that is one way you get people supporting economic policies that don't benefit them personally.
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