According to some people, income tax should be done away with in the

Question

According to some people, income tax should be done away with in the US since there are several other ways to collect taxes. A few countries in Europe have successfully abolished income taxes by raising other taxes such as sales tax. Of course this makes products more expensive but with the added amount of money you would receive on your paycheck, you will still be better off than you were paying income taxes.

Which of the following, if true, provides the most support for the argument above?

(A) The prices of products in European countries, when converted into US dollars at current rates are very similar to their prices in the United States.

(B) The increase in prices of products because of the increased sales tax rate will not more than offset the benefit of not paying any income taxes.

(C) The legislative body in the United States has stated that it will support the move to abolish income tax.

(D) Apart from increasing sales tax, the government can also increase other special taxes such as those on petroleum products.

(E) The government has enough funds in reserve currently to be able to absorb any shock because of lowered tax collection.

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AdarshSambare · Answer

Explanation: The argument’s key claim is that replacing income tax with higher consumption taxes will leave people better off because the extra take-home pay will exceed the extra cost of higher prices. Choice B directly confirms that the price increase from higher sales tax will not outweigh the benefit of not paying income tax, which most strongly supports the conclusion.

Other options:
A is irrelevant—similar absolute prices in Europe don’t show net benefit after tax changes.
 Answer: B 
C and E are about political feasibility or government reserves, not about whether individuals are better off.
D merely lists other tax sources the government could use; it doesn’t show that consumers would end up better off.

literaryzeitgeist · Answer

Let us first break down the argument.

According to some people, income tax should be done away with in the US since there are several other ways to collect taxes. A few countries in Europe have successfully abolished income taxes by raising other taxes such as sales tax. Of course this makes products more expensive but with the added amount of money you would receive on your paycheck, you will still be better off than you were paying income taxes.

Premise 1 - There are several other ways to collect taxes (besides income tax). 
Premise 2 (supports premise 1) - A few countries in Europe have successfully abolished income taxes by raising other taxes such as sales tax.
Premise 3 - With the added amount of money you would receive on your paycheck, you will still be better off than you were paying income taxes.
Conclusion - Income tax should be done away with in the US.

Premise 1 and 3 support the conclusion while premise 2 justifies premise 1. Any thoughts or disagreements on this? The argument can therefore rewritten as:

A few countries in Europe have successfully abolished income taxes by raising other taxes such as sales tax. So, there are several ways to collect taxes. Also, with the added amount of money you would receive on your paycheck, you will still be better off than you were paying income taxes. Therefore, income tax should be done away with in the US (according to some people).

Remember, we are to strengthen the argument, that is, we need one more reason that proves income tax should be done away with in the US.

Let us now go through the answer choices:

(A) The prices of products in European countries, when converted into US dollars at current rates are very similar to their prices in the United States. - So what? That does not mean income tax should be abolished in the US! - ELIMINATE

(B) The increase in prices of products because of the increased sales tax rate will not more than offset the benefit of not paying any income taxes. - Typical GMAT gobbledygook. Let us only eliminate the options that we are sure can be eliminated. - HOLD

(C) The legislative body in the United States has stated that it will support the move to abolish income tax. - Just because the body has stated does not mean it should be abolished. - ELIMINATE?

(D) Apart from increasing sales tax, the government can also increase other special taxes such as those on petroleum products. - Really not worried about this! - ELIMINATE

(E) The government has enough funds in reserve currently to be able to absorb any shock because of lowered tax collection. - Alright! But does that mean income tax should be abolished? Why? How? - ELIMINATE

Answer is (B). When you now look at (B), you understand that it gives us a reason in support of the conclusion. It says that the price rise that can happen by reason of increasing other taxes will not more than offset, meaning, will not c ompletely or fully cancel out the benefit of not paying any income taxes. Meaning, the public will still benefit. And therefore, the claim made by some people that income tax should be abolished is justified.

Let me know if you have any questions or disagreements!

B Sudharsan
Founder of the  Literary Zeitgeist

Diegoram17 · Answer

I like the solution - it’s helpful.

Bunuel · Answer

Official Explanation

The argument concludes that the increase in the prices of products because of an increase in the sales tax rate will not adversely affect the consumers because their salaries will also increase due to the abolition of income tax. However, what if this increase in the prices of products was much more than the increase in people’s salary? Then the situation will negatively impact the people. The argument obviously assumes this will not be the case. B states this and so strengthens the argument.

(A) The situation in European countries has no bearing on the situation in the US.
 (B) The correct answer. 
(C) This is an additional point and not relevant to the reasoning provided in the argument.
(D) Other taxes are outside the purview of the argument.
(E) The question is not whether the government will be able to bear the shock of abolition of income tax but whether such a move will be beneficial for the people.

According to some people, income tax should be done away with in the

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According to some people, income tax should be done away with in the

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