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# In order to raise revenue, the federal government planned a

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Re: In order to raise revenue, the federal government planned a [#permalink]

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05 Mar 2014, 20:37
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btw, the OA is E. I found this in the gmat prep practice exam 3. I got it wrong though .
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06 Mar 2014, 01:59
So the answer for this is E?

I believe E makes more sense because it gives a strong reason that state tax delinquents failed to pay not because they choose to be penalized by whichever amount that is lower but rather an oversight on their part. So even if federal taxes are reduced, it would encourage more delinquents to pay fed taxes and not state taxes.
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Re: In order to raise revenue, the federal government planned a [#permalink]

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08 Mar 2014, 08:23
ankur1901 wrote:
i will go with C. Below is the conclusion

However, economists projected that the federal government would collect a far lower percentage of total tax owed by delinquents than did state governments implementing similar programs.

Now we need to bear in mind that no amount of tax is pardoned, only penalty is pardoned. Had there been no amnesty program, tax collected will be Original tax + penalty.
Due to amnesty both state and federal govt is going to pardon the penalty.

Only if Federal penalty is higher than state penalty, the total tax collected by federal govt will be less than state govt.
Ans choice C mentions exactly the same thing.

As for E - chosen by around 60% respondents, here is my understanding.

E. Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.

We are looking for strengthener to conclusion : while E tells the reason for delinquency of federal and state tax..it no way gives us the reason to believe why Federal tax program will collect lesser amount.

Hi all

Just to respond bck to those who think it is C. We are not concerned about penalties , rather we are concerned about amount of tax owed that is collected is less in federal than in state. Penalty is OOS as it is pardoned under the amnesty program
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Re: In order to raise revenue, the federal government planned a [#permalink]

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27 Apr 2014, 01:56
perseverance84 wrote:
But this is a causal relationship "If the punishment is harsh for a particular crime then that particular crime is committed less frequently."
with the assumption that "All ppl commit crimes and will be punished".. Seems to be a far fetched statement.. IMO OA should be E...

Thoughts anyone???

rim200991 wrote:
Guys.. I think C makes sense.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

Since federal penalty was high , it was more likely that more people have paid the federal taxes on time .
However, since the penalty on state taxes was low, it was more likely that people might have overlooked or chose not to pay.

Simple reasoning: If the punishment is harsh for a particular crime then that particular crime is committed less frequently.

This implies that state might have more revenue to collect then federal government.

ok let me tell you the flaw with this reasoning . The passage mentions 'percentage of tax owed' . not the quantity of tax . Hence ,even if the tax owed to federal govt is lower , what matters is what percentage of tax returned .. And since the penalty was higher prior to amnesty , the incentive to return would also be higher and hence a larger percentage would actually be returned if at all .hence c is clearly wrong
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Re: In order to raise revenue, the federal government planned a [#permalink]

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27 Apr 2014, 21:25
shocky wrote:
perseverance84 wrote:
But this is a causal relationship "If the punishment is harsh for a particular crime then that particular crime is committed less frequently."
with the assumption that "All ppl commit crimes and will be punished".. Seems to be a far fetched statement.. IMO OA should be E...

Thoughts anyone???

rim200991 wrote:
Guys.. I think C makes sense.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

Since federal penalty was high , it was more likely that more people have paid the federal taxes on time .
However, since the penalty on state taxes was low, it was more likely that people might have overlooked or chose not to pay.

Simple reasoning: If the punishment is harsh for a particular crime then that particular crime is committed less frequently.

This implies that state might have more revenue to collect then federal government.

ok let me tell you the flaw with this reasoning . The passage mentions 'percentage of tax owed' . not the quantity of tax . Hence ,even if the tax owed to federal govt is lower , what matters is what percentage of tax returned .. And since the penalty was higher prior to amnesty , the incentive to return would also be higher and hence a larger percentage would actually be returned if at all .hence c is clearly wrong

C in no way can be the correct answer. If you read the argument carefully, it clearly specifies that taxes will be collected without charging any penalty. So option focussing on penalty will be out of scope.
IMO E

Hope it helps!!

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Re: In order to raise revenue, the federal government planned a [#permalink]

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29 Apr 2014, 10:33
Only option C compares state and federal tax, and can explain why federal tax WOULD BE lower.

E compares both too, but doesnt explain (or predict) why federal tax would be lower.
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Re: In order to raise revenue, the federal government planned a [#permalink]

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30 Apr 2014, 07:02
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Expert's post
gmihir wrote:
In order to raise revenue, the federal government planned a tax amnesty program
that allows tax delinquents to pay all owed tax without added financial penalty.
However, economists projected that the federal government would collect a far
lower percentage of total tax owed by delinquents than did state governments
implementing similar programs.Which of the following, if true, would most contribute
to an explanation of the economists’ projections?

A.Tax amnesty programs are only successful if they are widely publicized.

B.Most people who honestly pay their state tax are equally honest in paying their federal tax.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

D. The state tax rate varies considerably from state to state, but the federal tax is levied according to laws which apply to citizens of all the states.

E. Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.

We are trying to strengthen the conclusion that "the federal government would collect a far lower percentage of total tax (not tax + penalties) owed by delinquents (not all tax payers)".

A-Out of Scope
B-Out of Scope (we are looking at delinquents, not honest payers)
C-This would suggest that the federal government would see a higher percentage of tax collection because the benefit of the amnesty is much higher for federal tax than for state taxes
D-Out of Scope
E-The amnesty program for was successful because the unpaid taxes were due to oversight, not unwillingness to pay. Federal tax evasion is due to people fundamentally not wanting to pay tax, period. Saving on penalties does not incentivize people who have decided to not pay any tax.

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Re: In order to raise revenue, the federal government planned a [#permalink]

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30 Apr 2014, 07:49
A.Tax amnesty programs are only successful if they are widely publicized.
-- Publicity can not linked with why federal will receive lower tax than state.

B.Most people who honestly pay their state tax are equally honest in paying their federal tax.
-- When both federal and state tax is being paid honestly, where is the reason of federal receiving lower tax than state.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.
-- financial penalties have already been excused. It does not specify why federal will receive lower tax than state.

D. The state tax rate varies considerably from state to state, but the federal tax is levied according to laws which apply to citizens of all the states.
-- Out of scope.

E. Unlike most federal tax delinquents, most state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay.
-- Justifies. Tax delinquents who were actually paying their federal tax, were not paying their state tax. Now, they will and hence, state will receive more tax.
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14 Jun 2014, 22:13
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Hi,

In this question, we do not know the absolute values of tax owned by Fed and State tax delinquents. The Federal government proposes a penalty exemption program to encourage delinquents to pay the tax they owe and the State government plans a 'similar' program (mentioned in the last line).

Now, the prediction is that the federal government will collect a far lower percentage of tax owned by tax delinquents than the state government will. This implies that the exemption of penalty acts as an incentive to a far lower number of federal tax delinquents than to state tax delinquents. So, according to the prediction, both the state and federal governments plan to implement the exemption of the penalty on tax, but the federal government will recover a far lower percentage of the tax than the state government will.

If higher penalty imposed on federal tax delinquents ever was an incentive then we can reasonably assume that the percentage of federal tax delinquents would be lower than the number of state tax delinquents and that this trend would continue (the percentage of people owing federal tax could even decline) after the implementation of the penalty exemption. However, the prediction that the opposite will occur implies that higher penalty never was an incentive and therefore, (C) is immaterial.

So, what other factor could be at play? Even after the exemption of penalty at both federal and state government, the federal government expects to recover a far smaller percentage of tax from delinquents than the state government does. (E) justifies this - higher penalty or not, tax exemption or not, the federal tax delinquents do not pay tax because they do not WISH to pay tax - therefore, there is very little probability that a penalty exemption will encourage them to pay.

This should help!
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Re: In order to raise revenue, the federal government planned a [#permalink]

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31 Jul 2014, 12:49
aks456 wrote:
whats the OA?
Can someone explain

Premise:
In order to raise revenue, the federal government planned a tax amnesty program
that allows tax delinquents to pay all owed tax without added financial penalty.

Conclusion:
However, economists projected that the federal government would collect a far
lower percentage of total tax owed by delinquents than did state governments
implementing similar programs.

Question:
Which of the following, if true, would most contribute to an explanation of the economists’ projections?

Although advantage of penalty exemption is given, it is more likely that the Federal govt will collect less pct of tax than the State govt.

The entire argument revolves around the question that, why penalty exemption is not sufficient to attract more tax payers? What could be the reason for not going for such an opportunity? If E is the answer, then does it have any relation with "penalty exemption"? No, its true, in general. In fact, its true even if there is no program at all. If it is so general then we dont even need a premise here!! Hence E can not be an answer.

Choice C on the other hand, tries to fill out the gap between premise and conclusion, that why, even after giving such a benefit the desired result will not be achieved? In fact, it says that what looks like a benefit is actually not a benefit in case of Federal tax payment. And hence option C contributes to the explanation.
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10 Aug 2014, 10:50
aks456 wrote:
whats the OA?
Can someone explain

The answer is E. (I took GMAT practice exam and in the exam, the answer for this question was E.)
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11 Aug 2014, 18:17
I still don't get it. I think it's C.

Fed taxes high penalties = less people lie about taxes.
State taxes lower penalties = more people will lie.

When the government said "hey guys, we'll waive the penalties so this is your chance",

People who lied on Fed taxes = Still not many people. And whoever lied to avoid taxes will be like "nahh I lied ANYWAY, so still nahhh"
People who lied to States taxes = a lot of people lied, so some might consider to pay. Also, if the state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay, HOW ARE THEY GONNA KNOW THEY DID NOT PAY ENOUGH TAXES?!!??!

Hence, C.
I say OA is incorrect. =(
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12 Aug 2014, 01:32
fulyayildirim wrote:
aks456 wrote:
whats the OA?
Can someone explain

The answer is E. (I took GMAT practice exam and in the exam, the answer for this question was E.)

Which the practice exam did you take? GMAT PREP or Manhattan ?
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12 Aug 2014, 07:18
The answer is E. C goes against the argument, even if we assume that the penalties are to be paid (contrary to what is stated in the stem)

in-order-to-raise-revenue-the-federal-government-planned-a-63426.html?fl=similar
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12 Aug 2014, 20:39
we use non official question for practice only. if there is any problem with non official question, we should ingnore. dont waste time and energy for the problem.
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13 Aug 2014, 05:48
This is a question from official GMAT program. It is a part of exam pack 3.
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14 Aug 2014, 12:15
tae808 wrote:
I still don't get it. I think it's C.

Fed taxes high penalties = less people lie about taxes.
State taxes lower penalties = more people will lie.

When the government said "hey guys, we'll waive the penalties so this is your chance",

People who lied on Fed taxes = Still not many people. And whoever lied to avoid taxes will be like "nahh I lied ANYWAY, so still nahhh"
People who lied to States taxes = a lot of people lied, so some might consider to pay. Also, if the state tax delinquents fail to pay state tax because of an oversight rather than a decision not to pay, HOW ARE THEY GONNA KNOW THEY DID NOT PAY ENOUGH TAXES?!!??!

Hence, C.
I say OA is incorrect. =(

Be careful about the exact language of the argument. The argument states that economists believe that the federal government "would collect a far
lower percentage of total tax owed by delinquents than did state governments". In your explanation you make assumptions about the probable size of tax owed to federal or state governments. The amount that is owed is outside the scope of the argument. This argument is focused on the percent of tax already owed that will be collected through the amnesty program. The GMAT will try to confuse you by switching between raw amounts and percentages - watch out!

Choice C is super relevant to the argument but it's working in the wrong direction. Our job is to strengthen the economists' position that the federal government would collect a LOWER percentage of owed tax. If the federal government had higher penalties that would be waived in an amnesty program, there would be more incentive to participate and federal governments would be expected to collect a HIGHER percentage of owed tax - this is a weakening position, not strengthening. Choice C cannot be the answer.

Choice E states that state delinquents fail to pay out of oversight. The amnesty program alerts them to their payment oversight and they pay because they never really intended to not pay. Federal delinquents, on the other hand, are consciously not paying taxes. The fines/penalties are irrelevant to this group because they have no intention to ever pay the owed tax. Choice E strengthens the economists' position and is the correct answer.

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01 Sep 2014, 07:50
Hi,

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Re: In order to raise revenue, the federal government planned a [#permalink]

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26 Sep 2014, 01:01
It is a question from GMAC prep exam package 1.
OE is E
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Re: In order to raise revenue, the federal government planned a [#permalink]

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28 Sep 2014, 18:01
rim200991 wrote:
Guys.. I think C makes sense.

C.Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.

Since federal penalty was high , it was more likely that more people have paid the federal taxes on time .
However, since the penalty on state taxes was low, it was more likely that people might have overlooked or chose not to pay.

Simple reasoning: If the punishment is harsh for a particular crime then that particular crime is committed less frequently.

This implies that state might have more revenue to collect then federal government.

But it has been stated as "In order to raise revenue, the federal government planned a tax amnesty program
that allows tax delinquents to pay all owed tax without added financial penalty."

Hence C cant be the answer right.. Because when there is zero penalty 'C' doesn't make sense..

Some one kindly clarify..
Re: In order to raise revenue, the federal government planned a   [#permalink] 28 Sep 2014, 18:01

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