When people evade income taxes by not declaring taxable income, a vici

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.

Cycle : Tax Evasion -> Taxes are raised -> Burden on nonevading tax payers -> more taxpayers evade taxes.
How can we break this cycle. Either by ensuring that there is absolutely no Tax Evasion by tax payers, or some way for lawmakers to not raise taxes at all despite evasion.

More variety :
I’d pick C.



We need to find a statement, a negation of which will break the ‘vicious circle’:

(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 it: if it is false, i.e. lawmakers allow adequately for revenue that will be lost through evasion, then the statement that ‘Tax evasion forces lawmakers to raise income tax rates’ will also be false, and ‘a vicious cycle’ will not take place.

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.

Blue Book CR69

Weaken
Conclusion: Bad cycle results if people escape tax. How so?
Premise: People escape, forces lawmakers to raise tax rate, everyone (even the good ones) suffers, and cause more people to escape tax.
Thinking: Looking at premise should tell you that there are 2 out of 2 choices only: eliminate evaders or lawmakers should not raise tax rate due to evasion.

Not A: Increase in tax rate is good since it allows increase in pretax. This is still under the condition that tax rate is raised.
Not B: Success rate of method detecting evaders shows unreliable. This will still cause the cycle since there are remaining evaders not caught.
It's C: Lawmakers determine tax rate without accounting for lost revenue due to evasion. Lawmakers will not raise tax rate due to evasion.
Not D: People who escape tax cannot be prevented by lowering tax, can only be prevented if evaders are fined. But, the method is no guarantee that evasion will be prevented.
Not E: People have the same tax rate will cause them to evade. This still causes the cycle since people escape tax.

Hi gmat2013s,

I would rather like to have a chat with you to help you on this. But given our limitations, let's try to use this forum.

First of all, what is the definition of an assumption?

Based on that definition and the given question stem, what do you think is the conclusion here?

I am looking forward to the answers to both the questions above?

Thanks,
Chiranjeev

Hallo Chiranjeev

I will try to connect your questions with this argument to understand if there is really some error in my approach and understanding.

I want to learn maximum from this

Definition of assumption - A supporting premise which must be true to reach the conclusion .

Its a bridge between premise and conclusion .

When the bridge will be poorly made [ flawed assumption ] ---> It is unlikely to reach at the conclusion .
When assumption is valid --> Conclusion can be accepted as true or believable

Conclusion - ABC test / why test

Why VC results ?
1. People evade tax by not declaring taxable income
2. lawmakers forced to raise tax rate ---> raising burden to tax payers ---> more evasion --> VC occurs.

Question - VC could not occur unless which of the following statement is valid means if any of the following assumption is not valid then VC could not occur .

or - if any of the assumption is flawed or poorly made[ not true ] then the conclusion breaks [ VC couldn't occur]

Prethink - Lawmakers failed to understand that more tax raise can result more evasion --> loss of more money [ so failure of lawmakers in understanding the effect of tax raise is responsible for VC]

(A) An increase in tax rates tends to function as an
incentive for taxpayers to try to increase their
pretax incomes. --------------> Talks about the effect of increased tax rates [ not the underlying assumption which forces the lawmakers to raise tax ]
(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.--------------> M8 be true but not discussed, also concerned about a subset [ not the entire super set]
(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.----------> if this is true occurrence of Vicious cycle is also true
(0) 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.-----> OFS
(E) Taxpayers do not differ from each other with
respect to the rate of taxation that will cause
them to evade taxes.------------> No effect on the conclusion - irrelevant

I will be happy if the analysis is ok at all .

Thanks Chiranjeev for your concern .

Will wait to hear from you .

Hi gmat2013s,

Thanks for the detailed analysis. I see a lot of changes from your initial analysis.

First of all, your initial conclusion was: People when evade income tax - --> a vicious cycle occurs --->
Now, your conclusion seems to be (you haven't stated it clearly, so it "seems to be"): Vicious cycle

By the way, you are now correct in conclusion identification. If the assumption is defined as something in the absence of which the conclusion will not hold, then as the question stem says here, we are looking for an option statement without which vicious cycle wont hold. So, the occurrence of vicious cycle is the conclusion.

Now, I also see that you agree with the official answer C. However, since your explanations for accepting option C and rejecting option E are so succinct that I cannot really understand your true logic behind these.

Why do you think without option C, vicious cycle will not result? In other words, why without option C (i.e. if we negate the assumption), the conclusion breaks down?

Also, why do you think option E does not have any impact on the conclusion?

Thanks,
Chiranjeev

Hallo Chiranjev

Sorry for not specifically mentioning the conclusion part , yes , I have changed the conclusion to " VC rsults "
Question asked - to find the condition unless which VC would not result .
Assumption - If the assumption is defined as something in the absence of which the conclusion will not hold, then
Negation of Option C -During increasing of tax rates if lawmakers allow to incorporate revenue that can be lost through evasion then VC will not occur .

To avoid VC they should incorporate the revenue that can be lost through evasion . If they do not allow then VS would result .

So to occur VC - option C must be true

Option E Negation - Now I understood even if Taxpayers differ from each other with respect to the rate of taxation still VC will result as there is no connection of tax evasion followed by increased tax rate and more evasion - to -disagreement / agreement with the payable tax rates .

Thanks for showing the correct approach and importance of negation .

Will wait to have suggestion from you .
Regards
Sreshtha

Wow Sreshtha! Awesome comeback!

You are precisely correct now. Amazing job

Thanks,
Chiranjeev

Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 69
Page: 144
Difficulty:


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 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.

Dear Mike,

The OA for this question is C. This went over my head!!! Was unable to pick the answer at all! Please guide!!

Thank you
Regards
Soumya

Dear Soumya,
Thank you very much for giving such precise information about the source of this question. I am happy to help.

This, of course, is a very high quality question, as all official questions are. It's also very tricky and subtle. I'll point out: when you get a CR question about a topic that doesn't make sense, one thing I'll suggest is: read up on that topic. Even if you simply go to Wikipedia and read about tax evasion. Find some news analyses of tax evasion. Make it a mini-research project to read in depth about this topic a bit. Then, once you have learned a little more about the topic, go back to the question and see whether it makes sense. The GMAT CR is funny. Technically, you don't need outside information to answer any question, but you definitely need to have a general sense of the business world, of the decisions that real-world people make with money, etc. in order to have insight into the CR arguments. Here's the first in a series of articles that provides some real world background that can be helpful in interpreting CR questions.
https://magoosh.com/gmat/2012/gmat-supply-and-demand/

So for this question, there's a vicious loop.
1) People don't want to pay so much in taxes, so they illegally hide taxable income, and evade taxes.
2) Lawmakers don't get as much as they were expecting from the tax revenue, because of evasion, so they raise taxes.
3) Now, taxes are higher, and people have even more incentive to hide taxable income and evade taxes.

There are two parties, the lawyers and the tax payers, and each one, for totally rational and understandable reasons, responds to the action of the other in way that exacerbates the problem. That's a vicious loop.

Now, the prompt is difficult: "The vicious cycle described above could not result unless which of the following were true?" This is hard because of the double-negative construction ("not" + "unless"). In other words, this means: "In order for the vicious cycle to occur, which of the following MUST be true?"

In other words, for the correct answer, if it is true, the vicious cycle can happen, but if it's not true, the vicious cycle couldn't happen. Negating it makes the vicious cycle impossible. That's very important.

For incorrect answers, the vicious cycle could still occur even if we negate the answer: the answer is not strictly necessary for the cycle to occur.

To test the answers, we will need to negate them. The one which, when negated, makes the vicious cycle impossible, is the correct answer.

Now, let's look at the answers.
(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes.
Negation: increasing taxes does not motivate folks to make more money. Going out and making more money is not necessarily an easy thing to do, and it's a little beyond the scope. When the tax rate increase, the argument suggests people respond with more tax evasion. Maybe some people respond by trying to get higher paying jobs, whether this occurs or not does not appear to affect the vicious cycle. This is incorrect.

(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.
If the methods for detecting tax evaders consistently cost more than the money they recovered, then there would be no reason to conduct them, and they would have no affect on the argument. This is incorrect.

(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.
If lawmakers included tax evasion in their calculations when they set taxes, then they would just set the taxes once, taking tax evasion into account, and when real people evaded their taxes, the lawmakers would still get exactly what they predicted they would, so they would not absolutely no incentive to raise taxes any further. This would drastically break the vicious cycle. If this is not true, there is no vicious cycle, so this must be absolutely necessary for the cycle to occur. This is correct.

(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.
The opposite of none is some. Suppose some folks, maybe 1% of the population, could be induced to stop hiding taxable income if the tax rate went down --- suppose they were motivated to do so, even if penalties didn't change. Well, that alone would not break the vicious cycle, because as long as most people are still evading, the lawmakers will not get the tax revenue they were expected, so they will raise taxes, and one taxes go up, even this 1% would adopt the behavior of hiding taxable income. The vicious cycle only depends on people's behavior when taxes go up, not when they go down. This is incorrect.

(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes.
The argument directly implies that this is not true. If the taxes are at one level, and some people evade taxes, and then the taxes go up, and more people evade, it means that the new evaders were not motivated to evade taxes at the previous tax level, but at the new tax level they are motivated to evade. That means, these new evaders are motivated to evade at a different level from that of the folks who were evading at the previous, lower tax level. If the argument directly implies that a statement is false, then that statement cannot be necessary to the argument. This is incorrect.

The only possible answer is (C).

Does all this make sense?
Mike

Hi All,

This CR prompt describes a circular/repeating cycle that occurs when people evade paying taxes…

1) People avoid paying income taxes
2) Lawmakers are FORCED to raise income taxes
3) The tax burden becomes worse for people who actually pay tax, so….we end up back at Step 1….

1) More people avoid paying income taxes
Etc.

We're essentially asked to define WHY this cycle happens. When reading the prompt, I focused on the word "forced" - why EXACTLY would lawmakers be FORCED to raise taxes if some people didn't pay??? There must be some "need" for that money; when the lawmakers don't get what they need, then they have to raise taxes to try to get what they need. We're looking for an answer that addresses this issue (and likely points out something faulty in the lawmakers plan that causes the problem to occur).

Answer gives us exactly what we're looking for. The root "cause" of the cycle and the reason why it occurs.

GMAT assassins aren't born, they're made,
Rich

The answer is C

Explaination :-
It is always advisable to break the argument into premise and conclusion in simple language. Lets do it quickly
Premise 1) Tax evasion by cheaters increases the tax burden on honest taxpayers who pay tax properly.
Premise 2) This increased tax burden encourages honest taxpayers to become cheaters and start to evade income taxes themselves.
Conclusion) Therefore by not paying tax, cheaters convert honest people into cheater. This causes a vicious cycle.

Now the conclusion rest on good taxpayers becoming bad cheaters.
What if:- the lawmakers already know that many cheaters will not pay tax and the lawmakers simply have made the tax structure in such a clever way that the loss in revenue caused by non taxpaying cheaters is already compensated by some other method. In other words the lawmaker already know how much income tax will they will get.
Since the collected income tax is within their estimate, there is no reason for the lawmaker to increase the tax rate . Since there is no change in ta rate ,thus the honest people will not become cheaters and thus there will be no vicious cycle. IN OTHER WORDS :- IF LAWMAKER DO NOT HAVE OTHER METHOD TO COMPENSATE FOT THE LOST REVENUES THEN ONLY THIS VICIOUS CYCLE WILL HAPPEN.


Question ask us :- The vicious cycle described above COULD NOT result UNLESS which of the following WERE TRUE ??
(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.

YES.... WHEN LAWMKER DID NOT COMPENSATE FOR LOST REVENUE,THEY WILL BE STUNNED AFTER SEEING COLLECTION FROM INCOME TAX. THEY WOULD BE EXPECTING 25 MILLION IN TAX BUT THEY WILL GET ONLY 5 MILLION. THEY WILL THINK :- OH GOD I CANNOT RUN THIS GOVERNMENT SUCH LESS MONEY. I NEED TO INCREASE THE TAX NEXT YEAR TO GET SOME MORE MONEY FROM INCOME TAX.







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 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.

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. --This is part of the cycle. We need to find the part that starts the cycle.

(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. -Cost is out of scope

(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. If the lawmakers don't have adequate balances, then they have to increase the tax in order to increase the revenues.

(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. --This option would suggest to increase the tax always.

(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes. --Difference between tax payers is out of scope

This question heavily relies on the ability to understand the Question stem. It subtly asks us to weaken the argument.

(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes. If the increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes, it kind of shows that by doing so, people would rather increase their taxable income, than decrease it. Therefore, it is contradictory to the argument.

(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.This does not have an effect on people choosing to disclose or hide their taxable income, because it lies in the suspension of uncertainty.

(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. Consider if the lawmakers did allow for the revenue that will be lost through evasion in their income tax rates, then they would still have enough revenue after the tax evasion and therefore, they would not have to raise the income tax rates any further (because they are already generating the required revenue even after tax evasion.) Therefore, no increase in tax rates wouldn't coax honest taxpayers to hide their taxable incomes and therefore, the vicious cycle would break.

(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. The argument does not mention anything about lowering of tax rates. It only talks about raising of tax rates.

(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes.If that is true, the change of tax rates would not make any difference to the number of tax payers despite the lawmakers raising or lowering tax rates. But, it does prove that if the lawmakers chose to raise income tax, more people would still hide their taxable incomes. Thus, vicious cycle would continue.

GMATNinja
VeritasPrepKarishma



Can I replace unless with except and complete: cross out anything that ___ (the blank here is weakens)

Or:

Do I treat unless as a necessary condition (e.g. A student can not get higher grades in studies
unless he is consistent)

Hence, I need an answer choice that must be true to weaken the conclusion.



Is this similar to negation and we need to know its effect on conclusion?