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 does not break the chain in any way.

(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.
>> This can potentially reduce the tax evasion, but not sufficient for law makers to Not raise taxes or avoid evasion completely.

(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 they establish rates in such a way that their revenues are met despite evasion, they are likely to not raise taxes which is what we were looking for to break the cycle.

(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.
>> If fines are raised potentiall evasion can be reduced, but we dont know if it can be eliminated 100%.

(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade
taxes.
>> Even if taxpayers differ, ie. people with higher rates evade more often than people with lower rates. We still cant break the cycle.

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.