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In order to raise revenue, the federal government planned a

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Re: In order to raise revenue, the federal government planned a [#permalink] New post 05 Mar 2014, 20:37
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btw, the OA is E. I found this in the gmat prep practice exam 3. I got it wrong though :(.
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Re: In order to raise revenue, the federal government planned a [#permalink] New post 06 Mar 2014, 01:59
So the answer for this is E?


I believe E makes more sense because it gives a strong reason that state tax delinquents failed to pay not because they choose to be penalized by whichever amount that is lower but rather an oversight on their part. So even if federal taxes are reduced, it would encourage more delinquents to pay fed taxes and not state taxes.
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Re: In order to raise revenue, the federal government planned a [#permalink] New post 08 Mar 2014, 08:23
ankur1901 wrote:
i will go with C. Below is the conclusion

However, economists projected that the federal government would collect a far lower percentage of total tax owed by delinquents than did state governments implementing similar programs.

Now we need to bear in mind that no amount of tax is pardoned, only penalty is pardoned. Had there been no amnesty program, tax collected will be Original tax + penalty.
Due to amnesty both state and federal govt is going to pardon the penalty.

Only if Federal penalty is higher than state penalty, the total tax collected by federal govt will be less than state govt.
Ans choice C mentions exactly the same thing.

As for E - chosen by around 60% respondents, here is my understanding.

E. Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.

We are looking for strengthener to conclusion : while E tells the reason for delinquency of federal and state tax..it no way gives us the reason to believe why Federal tax program will collect lesser amount.



Hi all

Just to respond bck to those who think it is C. We are not concerned about penalties , rather we are concerned about amount of tax owed that is collected is less in federal than in state. Penalty is OOS as it is pardoned under the amnesty program
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Re: In order to raise revenue, the federal government planned a [#permalink] New post 27 Apr 2014, 01:56
perseverance84 wrote:
But this is a causal relationship "If the punishment is harsh for a particular crime then that particular crime is committed less frequently."
with the assumption that "All ppl commit crimes and will be punished".. Seems to be a far fetched statement.. IMO OA should be E...

Thoughts anyone???




rim200991 wrote:
Guys.. I think C makes sense.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

Since federal penalty was high , it was more likely that more people have paid the federal taxes on time .
However, since the penalty on state taxes was low, it was more likely that people might have overlooked or chose not to pay.


Simple reasoning: If the punishment is harsh for a particular crime then that particular crime is committed less frequently.

This implies that state might have more revenue to collect then federal government.



ok let me tell you the flaw with this reasoning . The passage mentions 'percentage of tax owed' . not the quantity of tax . Hence ,even if the tax owed to federal govt is lower , what matters is what percentage of tax returned .. And since the penalty was higher prior to amnesty , the incentive to return would also be higher and hence a larger percentage would actually be returned if at all .hence c is clearly wrong
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Re: In order to raise revenue, the federal government planned a [#permalink] New post 27 Apr 2014, 21:25
shocky wrote:
perseverance84 wrote:
But this is a causal relationship "If the punishment is harsh for a particular crime then that particular crime is committed less frequently."
with the assumption that "All ppl commit crimes and will be punished".. Seems to be a far fetched statement.. IMO OA should be E...

Thoughts anyone???




rim200991 wrote:
Guys.. I think C makes sense.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

Since federal penalty was high , it was more likely that more people have paid the federal taxes on time .
However, since the penalty on state taxes was low, it was more likely that people might have overlooked or chose not to pay.


Simple reasoning: If the punishment is harsh for a particular crime then that particular crime is committed less frequently.

This implies that state might have more revenue to collect then federal government.



ok let me tell you the flaw with this reasoning . The passage mentions 'percentage of tax owed' . not the quantity of tax . Hence ,even if the tax owed to federal govt is lower , what matters is what percentage of tax returned .. And since the penalty was higher prior to amnesty , the incentive to return would also be higher and hence a larger percentage would actually be returned if at all .hence c is clearly wrong


C in no way can be the correct answer. If you read the argument carefully, it clearly specifies that taxes will be collected without charging any penalty. So option focussing on penalty will be out of scope.
IMO E

Hope it helps!!


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Re: In order to raise revenue, the federal government planned a [#permalink] New post 29 Apr 2014, 10:33
Only option C compares state and federal tax, and can explain why federal tax WOULD BE lower.

E compares both too, but doesnt explain (or predict) why federal tax would be lower.
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Re: In order to raise revenue, the federal government planned a [#permalink] New post 30 Apr 2014, 07:02
Expert's post
gmihir wrote:
In order to raise revenue, the federal government planned a tax amnesty program
that allows tax delinquents to pay all owed tax without added financial penalty.
However, economists projected that the federal government would collect a far
lower percentage of total tax owed by delinquents than did state governments
implementing similar programs.Which of the following, if true, would most contribute
to an explanation of the economists’ projections?

A.Tax amnesty programs are only successful if they are widely publicized.

B.Most people who honestly pay their state tax are equally honest in paying their federal tax.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

D. The state tax rate varies considerably from state to state, but the federal tax is levied according to laws which apply to citizens of all the states.

E. Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.


The answer here is E.

We are trying to strengthen the conclusion that "the federal government would collect a far lower percentage of total tax (not tax + penalties) owed by delinquents (not all tax payers)".

A-Out of Scope
B-Out of Scope (we are looking at delinquents, not honest payers)
C-This would suggest that the federal government would see a higher percentage of tax collection because the benefit of the amnesty is much higher for federal tax than for state taxes
D-Out of Scope
E-The amnesty program for was successful because the unpaid taxes were due to oversight, not unwillingness to pay. Federal tax evasion is due to people fundamentally not wanting to pay tax, period. Saving on penalties does not incentivize people who have decided to not pay any tax.

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Re: In order to raise revenue, the federal government planned a [#permalink] New post 30 Apr 2014, 07:49
A.Tax amnesty programs are only successful if they are widely publicized.
-- Publicity can not linked with why federal will receive lower tax than state.

B.Most people who honestly pay their state tax are equally honest in paying their federal tax.
-- When both federal and state tax is being paid honestly, where is the reason of federal receiving lower tax than state.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.
-- financial penalties have already been excused. It does not specify why federal will receive lower tax than state.


D. The state tax rate varies considerably from state to state, but the federal tax is levied according to laws which apply to citizens of all the states.
-- Out of scope.

E. Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.
-- Justifies. Tax delinquents who were actually paying their federal tax, were not paying their state tax. Now, they will and hence, state will receive more tax.
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Re: In order to raise revenue, the federal government planned a [#permalink] New post 14 Jun 2014, 22:13
Hi,

In this question, we do not know the absolute values of tax owned by Fed and State tax delinquents. The Federal government proposes a penalty exemption program to encourage delinquents to pay the tax they owe and the State government plans a 'similar' program (mentioned in the last line).

Now, the prediction is that the federal government will collect a far lower percentage of tax owned by tax delinquents than the state government will. This implies that the exemption of penalty acts as an incentive to a far lower number of federal tax delinquents than to state tax delinquents. So, according to the prediction, both the state and federal governments plan to implement the exemption of the penalty on tax, but the federal government will recover a far lower percentage of the tax than the state government will.

If higher penalty imposed on federal tax delinquents ever was an incentive then we can reasonably assume that the percentage of federal tax delinquents would be lower than the number of state tax delinquents and that this trend would continue (the percentage of people owing federal tax could even decline) after the implementation of the penalty exemption. However, the prediction that the opposite will occur implies that higher penalty never was an incentive and therefore, (C) is immaterial.

So, what other factor could be at play? Even after the exemption of penalty at both federal and state government, the federal government expects to recover a far smaller percentage of tax from delinquents than the state government does. (E) justifies this - higher penalty or not, tax exemption or not, the federal tax delinquents do not pay tax because they do not WISH to pay tax - therefore, there is very little probability that a penalty exemption will encourage them to pay.

This should help!
Re: In order to raise revenue, the federal government planned a   [#permalink] 14 Jun 2014, 22:13
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