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When people evade income taxes by not declaring taxable [#permalink]
 01 May 2005, 04:27
Question Stats:
16% (03:18) correct
83% (00:19) wrong based on 1 sessions
When people evade income taxes by not declaring taxable income, a vicious cycle results. Tax evasion forces lawmakers to raise income tax rates, which causes the tax burden on nonevading taxpayers to become heavier. This, in turn, encourages even more taxpayers to evade income taxes by hiding taxable income.
The vicious cycle described above could not result unless which of the following were true?
(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes.
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost through evasion, bring in more than they cost, but their success rate varies from year to year.
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue, they do not allow adequately for
(D) No one who routinely hides some taxable income can be induced by a lowering of tax rates to stop hiding such income unless
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes.
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is C) and D) complete ?
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Re: CR Tax Evasion [#permalink]
01 May 2005, 07:33
wunderbar03 wrote: When people evade income taxes by not declaring taxable income, a vicious cycle results. Tax evasion forces lawmakers to raise income tax rates, which causes the tax burden on nonevading taxpayers to become heavier. This, in turn, encourages even more taxpayers to evade income taxes by hiding taxable income.
The vicious cycle described above could not result unless which of the following were true?
(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes.
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost through evasion, bring in more than they cost, but their success rate varies from year to year.
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue, they do not allow adequately for
(D) No one who routinely hides some taxable income can be induced by a lowering of tax rates to stop hiding such income unless
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes.
Looks like the choices are incomplete.....
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Here are the choices:
(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase
their pretax incomes.
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost
through evasion, bring in more than they cost, but their success rate varies from years to
year.
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue,
they do not allow adequately for revenue that will be lost through evasion.
(D) No one who routinely hides some taxable income can be induced by a lowering of tax
rates to stop hiding such income unless fines for evaders are raised at the same time.
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause
them to evade taxes.
Can somebody explain what does the question mean? I think it means 'if which of the following were true, then the vicious cycle will not happen?'
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IMO C, that is why they generate less income...
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Director
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ranga, can you plz explain the questiion and your answer c plz?
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I think C is the right answer.
Because....When lawmakers establish income tax rates in order to generate a certain level of revenue, they do not allow adequately for .... this is the reason the vicious cycle continues. If the lawmakes had adequate fund the problem stated would not exist.
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hey ya......
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saurya_s wrote: Here are the choices:
(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase
their pretax incomes.
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost
through evasion, bring in more than they cost, but their success rate varies from years to
year.
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue,
they do not allow adequately for revenue that will be lost through evasion.
(D) No one who routinely hides some taxable income can be induced by a lowering of tax
rates to stop hiding such income unless fines for evaders are raised at the same time.
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause
them to evade taxes.
Can somebody explain what does the question mean? I think it means 'if which of the following were true, then the vicious cycle will not happen?'
The question means which of the following answer is a must for the argument above. This means you need to pick one from the answer list such that it will give you a complete argument. The vicious cycle in the passage need one additional element to make it works.
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saurya_s wrote: ranga, can you plz explain the questiion and your answer c plz?
Viscious Cycle --> People evade tax so law makers make less revenue so they increase tax so more people evade tax
This cycle would not happen if law makers had given leeway for evaders and fixed the tax such a way that they will generate their income, in which case they dont have to increase their tax every year and more people will not start evading.
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The vicious cycle described above could not result unless which of the following were true?
(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase
their pretax incomes.
Taxpayers would want to lower pretax
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost
through evasion, bring in more than they cost, but their success rate varies from years to
year.
If true, the cycle wouldn't be so "vicious"
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue,
they do not allow adequately for revenue that will be lost through evasion.
CORRECT, lawmakers aren't allowing for lost revenue, thus the vicious cycle continues.
(D) No one who routinely hides some taxable income can be induced by a lowering of tax
rates to stop hiding such income unless fines for evaders are raised at the same time.
Fines are not mentioned.
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause
them to evade taxes.
If taxpayers did not differ they all would evade, or they all wouldn't. There wouldn't be increases in evasion that resulted from increases in rates.
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I agree with ranga41. The argument falls apart when you apply the negation test to C.
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Director
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I don't understand the meaning of question here? Seems to negative= not and unless? Can some one explain the meaning of unless?
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Re: CR Tax Evasion [#permalink]
26 Oct 2011, 13:45
I picked C...very complicated to understand
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Re: When people evade income taxes by not declaring taxable [#permalink]
19 Jan 2013, 02:45
Question: The vicious cycle described above could not result unless which of the following were true? The question is twisted in interesting way with double negations. Note the use of "could not" along with "Unless"="IF..NOT" or "Except-IF". You can simplify the question to: Reworded Question: The vicious cycle described above could result if which of the following were true? Hence you need to eliminate the choices which "breaks" the vicious cycle and choose the choice that does not [break the cycle]. (C) When lawmakers establish income tax rates in order to generate a certain level of revenue, they do not allow adequately for revenue that will be lost through evasion. -- This is the correct answer choice! This situation will ensure that the vicious cycle is continued.Hence choice(C) is the answer.
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Re: When people evade income taxes by not declaring taxable
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19 Jan 2013, 02:45
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