LR Drill Set 10, Question 5
Politician: To encourage our citizens to save their(49 more words not shown)
Which one of the following,(11 more words not shown)
- AThe increase in(12 more words not shown)
- BDecreased consumer spending(8 more words not shown)
- CCitizens with low(15 more words not shown)
- DMost citizens do(9 more words not shown)
- EThe government will(15 more words not shown)
Reading the argument
Will the government still bring in enough money?
Lower income taxes mean collecting less through one channel. Higher sales taxes might make up the difference, but the proposal also encourages people to buy less. A higher rate applied to fewer purchases doesn't automatically produce enough revenue to replace what was lost.
My first reaction also concerns the broader economy. If people spend less at restaurants and stores, what happens to those businesses? That's a reasonable policy question, but let's separate it from the claim the politician actually makes. The claim is that the government can continue funding its current programs.
We don't have to decide whether every part of this proposal is wise to evaluate that claim. We need support for its financial feasibility. If the overall amount collected stays at least as high as under the current system, that would give us a good reason to think the existing programs can still be funded.
What we’re looking for
For the strengthener, follow the money. What happens to the total revenue after both tax changes and the expected spending response?
Working the answers
- A
'Would not exceed' permits the sales-tax increase to be smaller than the income-tax decrease. In that case, total revenue from those sources falls. It also permits an exact offset, but it doesn't assure us of that favorable outcome. A therefore fails to give the firm support that E supplies.
- B
This addresses the initial worry about the economy, which is why it can feel appealing. But avoiding damage to the national economy doesn't establish that government revenues remain sufficient for the existing programs. B could be true while the tax changes leave the government with less money. The claimed ability to fund programs needs a more direct connection.
- C
A group of citizens could avoid losing money while the government collected less. This describes the policy's effect on people with low incomes and low expenses, not its effect on the total budget. That group's outcome doesn't settle whether the programs can still be funded.
- D
Whether people benefit from the programs is a different question from whether the government can pay for them. Even an unpopular or poorly targeted program costs money. D gives us no information about the revenue available to cover those costs.
- ECorrect
Total government revenue will be at least as high under the new policy as it is now. That directly addresses the worry that cutting one tax and discouraging spending could leave a funding shortfall.
The government would retain at least the revenue base it currently has for funding its programs. E doesn't prove every aspect of the policy is desirable, and it doesn't guarantee that future costs can never rise. It supports the particular claim that changing these taxes need not prevent continued funding.
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