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Between 1977 and 1989, the percentage of income paid to

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CR - Federal Tax 700 level [#permalink] New post 17 Jul 2011, 18:58
Between 1977 and 1989, the percentage of income paid to Federal taxes by the richest one percent of Americans decreased, from 40 percent to 25 percent. By the end of that same period, however, the richest one percent of Americans were paying a larger proportion of all Federal tax revenues, from 12.7 percent in 1977 to 16.2 percent in 1989.

Which of the following, if true, contributes most to an explanation of the discrepancy described above?

Between 1977 and 1989, the Internal Revenue Service increased the percentage of its staff members responsible for audits and tax collection.
Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation.
Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from untaxable to taxable assets.
Between 1977 and 1989, the top tax rate was reduced from 70 percent to 31 percent and several tax loopholes were eliminated.
Between 1977 and 1989, the amount of Federal taxes paid by the richest one percent of Americans increased by $45 billion, while the amount paid by all Americans rose by $50 billion.
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Re: CR - Federal Tax 700 level [#permalink] New post 17 Jul 2011, 19:01
B looks a clear winner. If the income increased significantly, a lower tax rate would still result in higher tax collections

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Re: CR - Federal Tax 700 level [#permalink] New post 17 Jul 2011, 20:21
Between 1977 and 1989, the Internal Revenue Service increased the percentage of its staff members responsible for audits and tax collection.(Tells us nothing)
Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation. (Tells us why the % went up when the number of people in the top 1% band of richest folks went down)
Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from untaxable to taxable assets. ( Tells us % should be higher but a weak answer)
Between 1977 and 1989, the top tax rate was reduced from 70 percent to 31 percent and several tax loopholes were eliminated. (There was an increase then a decrease, not really telling us anything(
Between 1977 and 1989, the amount of Federal taxes paid by the richest one percent of Americans increased by $45 billion, while the amount paid by all Americans rose by $50 billion. [color=#BF8000](This absolute values and doesnt tell us why % are higher) I chose B as well. [/color]
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Re: CR - Federal Tax 700 level [#permalink] New post 17 Jul 2011, 20:37
Between 1977 and 1989, the Internal Revenue Service increased the percentage of its staff members responsible for audits and tax collection.This we cannot be sure had an impact - and even if we did it would be presumably on all Americans equally - not just the richest
Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation.If the income increases by such a high percentage - even with fall in tax rates, absolute value of Tax from Richest Americans will be high. And thus it will form a higher perentage of total tax collected
Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from untaxable to taxable assets.While this would mean more income would be taxable now - the answer is not as strong - use of many and not all and slightly generalised nature of the option
Between 1977 and 1989, the top tax rate was reduced from 70 percent to 31 percent and several tax loopholes were eliminated.that would be for all americans - why just the richest?
Between 1977 and 1989, the amount of Federal taxes paid by the richest one percent of Americans increased by $45 billion, while the amount paid by all Americans rose by $50 billion.Absolute values which tell nothing about original value and new value and change in percentage terms
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Re: CR - Federal Tax 700 level [#permalink] New post 19 Jul 2011, 12:03
post the OA before any of the blabber can make sense.

these percentage questions in CR stink sometimes.
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Re: CR - Federal Tax 700 level [#permalink] New post 19 Jul 2011, 13:20
I agree, "B" looks like the clear winner.

I know this question is from one of the Kaplan books, but i dont know the OA.
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Re: CR - Federal Tax 700 level [#permalink] New post 23 Jul 2011, 20:19
bschool83 wrote:
Between 1977 and 1989, the percentage of income paid to Federal taxes by the richest one percent of Americans decreased, from 40 percent to 25 percent. By the end of that same period, however, the richest one percent of Americans were paying a larger proportion of all Federal tax revenues, from 12.7 percent in 1977 to 16.2 percent in 1989.

Which of the following, if true, contributes most to an explanation of the discrepancy described above?

Between 1977 and 1989, the Internal Revenue Service increased the percentage of its staff members responsible for audits and tax collection.
Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation.
Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from untaxable to taxable assets.
Between 1977 and 1989, the top tax rate was reduced from 70 percent to 31 percent and several tax loopholes were eliminated.
Between 1977 and 1989, the amount of Federal taxes paid by the richest one percent of Americans increased by $45 billion, while the amount paid by all Americans rose by $50 billion.



IMO D : Between 1977 and 1989, the top tax rate was reduced from 70 percent to 31 percent and several tax loopholes were eliminated.

the top tax rate was reduced from 70 percent to 31 percent
: This indicates that the percentage of the income paid by the
rich reduced.

several tax loopholes were eliminated : Indicates that more and more rich were forced to pay taxes.

These two points explain the conclusion.
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Re: Kap CR- Percentage of income paid to federal taxes [#permalink] New post 19 Oct 2011, 22:04
B
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Re: Kap CR- Percentage of income paid to federal taxes [#permalink] New post 21 Oct 2011, 23:48
Got D:(
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Re: Between 1977 and 1989, the percentage of income paid to [#permalink] New post 14 Jan 2012, 22:15
B is the only one that directly points at increased income for richest 1% without comparing to movable or unmovable assets or the rest of the Americans!
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Re: Between 1977 and 1989, the percentage of income paid to [#permalink] New post 12 Oct 2012, 22:55
I don't agree with B.
1% of the richest increased their income by 75%. But others increased their income by 200% -> How can you say 1% tax contribute more to the share of federal tax ?

I believe E better explain the case:
The increase of the 1% is slightly smaller (10%) than the increase of TOTAL of the others => Their percentage of the income increase surely higher than that of others. => change the share of 1% tax in total federal tax poll
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Re: Between 1977 and 1989, the percentage of income paid to [#permalink] New post 16 Oct 2012, 03:34
I went for E, but after a thorough look, what E does is to merely present the idea of " the richest one percent of Americans were paying a larger proportion of all federal tax revenues from 12.7 percent in 1977 to 16.2 percent " from another perspective. E is definitely a fact, but not the fact that can explain the contradiction.
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Re: Between 1977 and 1989, the percentage of income paid to [#permalink] New post 03 Jan 2014, 07:41
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Re: Between 1977 and 1989, the percentage of income paid to [#permalink] New post 03 Jan 2014, 10:46
Between 1977 and 1989, the percentage of income paid to federal taxes by the richest one percent of Americans decreased from 40 percent to 25 percent. By the end of that same period, however, the richest one percent of Americans were paying a larger proportion of all federal tax revenues from 12.7 percent in 1977 to 16.2 percent in 1989.

Which of the following, if true, contributes most to an explanation of the discrepancy described above ?

(A) Between 1977 and 1989, the IRS increased the percentage of its staff members responsible for audits and tax collection.... IRRELEVANT......

(B) Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation...IRRELEVANT....

(C) Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from taxable to untaxable....NOTHING CAN BE DEDUCED......

(D) Between 1977 and 1989, the tax rate paid by middle-income Americans was reduced, but several tax loopholes were eliminated....NOT CONCLUSIVE...

(E) Between 1977 and 1989, the amount of federal taxes paid by the richest one percent of American increased by $45 billion, while the amount paid by all Americans rose by $50 billion.....THIS COULD EXPLAIN THE DISCREPANCY. Federal taxes paid by the richest one percent of American increased by $45 billion(percentage of income paid to federal taxes could still decrease from 40 percent to 25 percent), while the amount paid by all Americans rose by $50 billion. The proportionality of increase shows that the proportion of all federal tax revenues by the richest one percent of Americans could increase from 12.7 percent in 1977 to 16.2 percent in 1989.
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Re: Between 1977 and 1989, the percentage of income paid to [#permalink] New post 03 Jan 2014, 12:16
semwal wrote:
Between 1977 and 1989, the percentage of income paid to federal taxes by the richest one percent of Americans decreased from 40 percent to 25 percent. By the end of that same period, however, the richest one percent of Americans were paying a larger proportion of all federal tax revenues from 12.7 percent in 1977 to 16.2 percent in 1989.

Which of the following, if true, contributes most to an explanation of the discrepancy described above ?

(A) Between 1977 and 1989, the IRS increased the percentage of its staff members responsible for audits and tax collection.... IRRELEVANT......

(B) Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation...IRRELEVANT....

(C) Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from taxable to untaxable....NOTHING CAN BE DEDUCED......

(D) Between 1977 and 1989, the tax rate paid by middle-income Americans was reduced, but several tax loopholes were eliminated....NOT CONCLUSIVE...

(E) Between 1977 and 1989, the amount of federal taxes paid by the richest one percent of American increased by $45 billion, while the amount paid by all Americans rose by $50 billion.....THIS COULD EXPLAIN THE DISCREPANCY. Federal taxes paid by the richest one percent of American increased by $45 billion(percentage of income paid to federal taxes could still decrease from 40 percent to 25 percent), while the amount paid by all Americans rose by $50 billion. The proportionality of increase shows that the proportion of all federal tax revenues by the richest one percent of Americans could increase from 12.7 percent in 1977 to 16.2 percent in 1989.

Hi semwal

Don't you think choice E is irrelevant? I am afraid I did not completely understand the reasoning you mentioned.

The discrepancy present in the given argument is:
1) percentage of income paid to federal taxes by the richest one percent of Americans decreased
2) proportion of all federal tax revenues paid by richest one percent of Americans increased


We have to choose a choice that explains both the contradicting statements given in the argument. If anything, choice E is actually widening the gap between the two statements rather that resolving it. But choice B, if observed closely, seems convincing.

(B) Between 1977 and 1989, the before-tax income of the richest one percent of Americans increased by over 75 percent when adjusted for inflation.


B says that before-tax income of the richest one percent of Americans is increased. Clearly, the amount of income that is taxable would be reduced even though the proportion of the richest one percent of Americans is increased. This is all needed to close the gap.

Hope that helps.
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Between 1977 and 1989, the percentage of income paid to [#permalink] New post 17 Aug 2014, 06:56
There are two versions of option C floating here...

(i) Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from taxable to untaxable.
(ii) Between 1977 and 1989, many of the richest one percent of Americans shifted their investments from untaxable to taxable.


What we are looking for:
An option that explains following points:
- Why percentage (tax amount vs total income) dropped
- Why tax amount increased


Analysis
I would agree with version (i) option B wins

Query
but with (ii) - which is as how I got it on Kaplan CAT, why would option B trump?

As per OA (by Kaplan)
(ii) - Justifies why the tax amount increased but not why the percentage increased an is doesn't explain both points option (ii) loses
B- explains why tax amount increased - Hence is the most relevant option

My concern is Option B, just like option (ii), also doesn't explain one of the two points i.e. it doesn't explain why percentage decreased

Which means booth (ii) and B explain one point and not the other, then how come option B trumps (ii)?
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Between 1977 and 1989, the percentage of income paid to   [#permalink] 17 Aug 2014, 06:56
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