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One tax-reform proposal that has gained increasing support

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One tax-reform proposal that has gained increasing support [#permalink] New post 10 Aug 2004, 18:04
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One tax-reform proposal that has gained increasing support in recent years is the flat tax which would impose a uniform tax rate on incomes at every level. Opponents of the flat tax say that a progressive tax system, which levies a higher rate of taxes on higher income payers, is fairer, placing the greater burden on those better able to bear it. However, the present crazy quilt of tax deductions, exemptions, credits, and loopholes benefits primarily the high-income taxpayer. Who is consequently able to reduce his or her effective tax rate, often to a level below that paid by the lower-income taxpayer. Therefore.......

A) higher-income taxpayers are likely to lend their support to the flat-tax proposal now being considered by Congress
B) a flat-tax system that allowed no deductions or exemptions would substantially increase actual government revenues.
C) the lower-income taxpayer might well be penalized by the institution of a flat-tax system in this country.
D) the progressive nature of our present tax system is more illusory than real.
E) the flat tax would actually be fairer to the lower-income taxpayer than any progressive-tax system could be.

Pls explain your answer choice....Also pls answer the poll.
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Re: CR - Progressive Tax Vs Flat Tax. Easy, Medium, Hard?? [#permalink] New post 10 Aug 2004, 19:01
I think, it is B.

A) higher income group is happy with current structure - wrong
B) this is possible. b/c lower income grp will pay the same, but higher income group will pay more in taxes.
C) nope. it will almost be the same
D) true, but not the conclusion of the passage.
E) they might pay the same that they pay now. No.
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 [#permalink] New post 10 Aug 2004, 21:45
D most logically completes the sentance. (E. goes to far)
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Re: CR - Progressive Tax Vs Flat Tax. Easy, Medium, Hard?? [#permalink] New post 10 Aug 2004, 22:08
My vote for E
B goes too far, we dont know much about govt revenues
D lacks sufficient evidence to support it
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Re: CR - Progressive Tax Vs Flat Tax. Easy, Medium, Hard?? [#permalink] New post 11 Aug 2004, 00:11
I am going ahead with D. D can be reached because the author clearly mentions that the high-income taxpayer reduces through some tricks, his or her effective tax rate, often to a level below that paid by the lower-income taxpayer.

A - Contrary to the statements in the passage. Infact, he takes advantage of the loopholes in the present crazy quilt of tax deductions.

B - May not. Depends on the flat rate - 10% or 90%

C - May not be penalized if the flat rate is just 10% or even less. We have no idea about this.

E - It depends on the percentage of tax - 10% or 90%. Cannot say anything about this.


gmataquaguy wrote:
One tax-reform proposal that has gained increasing support in recent years is the flat tax which would impose a uniform tax rate on incomes at every level. Opponents of the flat tax say that a progressive tax system, which levies a higher rate of taxes on higher income payers, is fairer, placing the greater burden on those better able to bear it. However, the present crazy quilt of tax deductions, exemptions, credits, and loopholes benefits primarily the high-income taxpayer. Who is consequently able to reduce his or her effective tax rate, often to a level below that paid by the lower-income taxpayer. Therefore.......

A) higher-income taxpayers are likely to lend their support to the flat-tax proposal now being considered by Congress
B) a flat-tax system that allowed no deductions or exemptions would substantially increase actual government revenues.
C) the lower-income taxpayer might well be penalized by the institution of a flat-tax system in this country.
D) the progressive nature of our present tax system is more illusory than real.
E) the flat tax would actually be fairer to the lower-income taxpayer than any progressive-tax system could be.

Pls explain your answer choice....Also pls answer the poll.

_________________

Awaiting response,

Thnx & Rgds,
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 [#permalink] New post 11 Aug 2004, 01:29
D would be my choice.

A- higher income group may not welcome it or atleast not lobbying for it perhaps - especially if they are able lower tax payment exploiting the loopholes in the present tax system

B - not discussed. We dont know if the govt intent is to 'increase' reveneues or to look at a fair system that can be good for all. So a specific intent behind is a wrong conclusion.

C - Not sure - can be of help on the contrary

E - Dont know yet. May be the new tax system can have flaws that may surface later that can again not serve the purpose.

D directly completes the sentence (wthin what is already known - about the present tax system) and concludes logically the 'unsaid' part which is -'present system is illusionary'.
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 [#permalink] New post 11 Aug 2004, 01:35
D is the logical completion of the author's idea, I vote for D
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 [#permalink] New post 11 Aug 2004, 04:11
I was on the fence between A and D, but since we're speaking from author's perspective, D should be the answer. Progressive rate should make the wealthy pay a higher tax rate, but it does not. The rate, notice, not the actual amount, that the wealthy pay is actually smaller that what's paid by the not wealthy. Hence, the system is more illusionary than real.
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 [#permalink] New post 13 Aug 2004, 04:42
The OA is "D". I got spanked on this one. Mad props to those who got to the correct answer.

My apologies for the late OA. I posted the OA yesterday but didnt check whether they posted or not. For someone reason it didnt show up. I tried accessing gmatclub from work and the website wasnt available. I'm wondering if its coz of our security policies [the website was available before] or was the gmat website down.
  [#permalink] 13 Aug 2004, 04:42
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