PrepTest 148, Section 4, Question 14
Principle: A government should reduce taxes on imports(50 more words not shown)
Which one of the following(14 more words not shown)
- AReducing taxes on(12 more words not shown)
- BReducing taxes on(19 more words not shown)
- CThe domestic textile(10 more words not shown)
- DThe domestic textile(23 more words not shown)
- EThe added competition(15 more words not shown)
Reading the argument
A tax cut can help buyers and still trigger the exception. Imagine that reducing a tax on imported bananas would help consumers buy them more cheaply, but the added competition would significantly harm a domestic banana industry. Under this principle, that harm would settle the recommendation against the tax cut despite the consumer benefit.
What we’re looking for
Now apply the same rule to textiles. We want the conclusion that import taxes should not be reduced. So I'd look for added competition that would significantly harm a domestic industry. That is the condition activating the exception. Keep the proposed action straight: we're deciding whether to reduce a tax, not whether to ban imported textiles.
Working the answers
- A
This fails to establish the condition that would support reducing the tax. But failing to establish that reason isn't the same as establishing a reason never to reduce it. The principle doesn't say to reject every tax cut that fails to benefit many consumers. To get the negative recommendation, we need the stated significant-harm exception or some other rule that isn't supplied here.
- B
Not benefiting an industry is different from significantly harming it. The industry might be unaffected while some consumers benefit. That would not activate the exception. B therefore doesn't establish the conclusion that the tax should not be reduced.
- C
Competition in export markets concerns the industry's sales abroad. The exception requires significant harm from the added competition caused by reducing import taxes. Existing competition elsewhere doesn't establish that a reduction in this tax would cause the required harm.
- D
Another measure could help more without making this tax reduction impermissible under the given principle. We aren't told always to choose the measure with the largest benefit. We are told to reject a reduction that would cause significant harm to a domestic industry, and D doesn't establish that condition.
- ECorrect
Any reduction would create added competition that significantly harms the domestic textile industry. A textile-import tax reduction therefore falls under the exception: the government should not reduce it. This is enough even if consumers would benefit, because the significant-harm rule is expressly an exception to the consumer-benefit rule.
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