PrepTest 149, Section 4, Question 16
Economist: Currently, many countries rely primarily on taxing(50 more words not shown)
Which one of the following(6 more words not shown)
- Amost governments should(5 more words not shown)
- Bthe economies of(15 more words not shown)
- Cin most countries(12 more words not shown)
- Dthe tax laws(14 more words not shown)
- Eit is detrimental(12 more words not shown)
Reading the argument
Is promoting savings what the tax is supposed to do? The opening sentence gives a different purpose: funding government expenditures. A tax could raise the needed money without encouraging people to save.
But the economist then supplies a priority. Improving these economies is the most important challenge, and increasing savings is presented as the only way to do it. That makes the difference between the two taxes relevant: one does nothing to promote savings, while the other would encourage it.
What we’re looking for
To finish the argument, my first thought is that the current emphasis on income taxes isn't advancing this stated goal. Be careful, though: failing to encourage something isn't the same as actively preventing it. Let's look for a conclusion that fits the economist's comparison and priority.
Working the answers
- A
We are told about many countries, not most governments. Those claims aren't interchangeable. Also, taxes on savings and investment aren't automatically the income taxes discussed, and stopping those taxes entirely is a stronger recommendation than the argument supports. A changes both the group and the policy.
- B
We have no basis for 'rapidly.' Nothing tells us how long improvement would take. More fundamentally, saying increased savings is needed for improvement doesn't establish that encouraging savings guarantees improvement. Other requirements could remain even after a tax change.
- C
The argument doesn't compare the revenue these taxes would raise with the amount governments need to spend. Consumption taxes might encourage saving yet fall short of funding every expenditure on their own. C answers a revenue question the economist hasn't resolved.
- DCorrect
This goes further than my initial description and recommends a change. That is supported by the stated priority: if improving the economy is the main challenge, greater savings is required, and consumption taxes encourage saving, there is a reason to shift the tax laws toward consumption.
The word 'should' isn't a reason to reject the answer. The economist has given a goal and compared ways of pursuing it. D draws the practical recommendation from that comparison, without saying all income taxes must disappear or that consumption taxes alone will fund everything.
- E
Not encouraging savings doesn't establish that taxing income actively damages an economy's improvement. A tax could fail to promote that goal while helping pay for something else. E also extends the claim to any country, beyond the countries described. It overstates both the effect and the scope.
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