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If the tax rate were changed to 50%, they would now earn only $500k after taxes. However, they would earn even less they tried to compensate by laying people off, because they are already operating at the optimal spot, and the tax on their net profits doesn’t change that. In fact, it seems that raising taxes on profits could actually stimulate hiring, since (untaxed) reinvestment of money into salaries would be all that much more attractive vs taking the money out of the business as profit.

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