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Economist: Currently, many countries rely primarily on taxing income

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Economist: Currently, many countries rely primarily on taxing income  [#permalink]

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New post 31 Dec 2017, 09:07
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Question Stats:

64% (01:58) correct 36% (02:04) wrong based on 115 sessions

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Economist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving their economies, and the only way to accomplish this is to increase their savings rates. Hence, ________

Which one of the following most logically completes the economist's argument?

(A) most governments should stop taxing savings and investment
(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment
(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures
(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income
(E) it is detrimental to the economic improvement of any country to continue to tax income

Source: LSAT

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Re: Economist: Currently, many countries rely primarily on taxing income  [#permalink]

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New post 01 Jan 2018, 09:38
Tax Income --> Does not promote savings
Tax Consumption --> Promotes savings

(A) most governments should stop taxing savings and investment - Governments are not taxing savings and investment. They are taxing the income. Out of context.

(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment - Pace of improvement is not the focus of the argument.

(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures - We cannot infer this.

(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income - Correct.

(E) it is detrimental to the economic improvement of any country to continue to tax income - The argument focuses on promoting savings to improve the economy. Doesn't say taxing income is detrimental to the economy.

Answer: D
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Re: Economist: Currently, many countries rely primarily on taxing income  [#permalink]

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New post 05 Jan 2018, 12:34
Economist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving their economies, and the only way to accomplish this is to increase their savings rates. Hence, ________

Which one of the following most logically completes the economist's argument?

(A) most governments should stop taxing savings and investment -Out of context
(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment -We don't know whether the economies WILL improve
(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures -ALONE? extreme
(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income -Correct
(E) it is detrimental to the economic improvement of any country to continue to tax income -Opposite of what the argument is stating
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Re: Economist: Currently, many countries rely primarily on taxing income &nbs [#permalink] 05 Jan 2018, 12:34
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Economist: Currently, many countries rely primarily on taxing income

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