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In order to raise revenue, the federal government planned a

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

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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.
[Reveal] Spoiler: OA

Originally posted by mymba99 on 04 May 2008, 12:22.
Last edited by mikemcgarry on 13 Nov 2017, 12:09, edited 2 times in total.
Edited the question
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Re: In order to raise revenue, the federal government planned a [#permalink]

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sondenso wrote:
E too,

I am really bad at this kind of question! Now my rule only is reading choice and eliminate according to the feeling. I know this skills risky. Do you have any tips?


Fist break out the premises and conclusion

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.

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

So we want to strengthen the argument that if the federal governemnt implements the same program they will collect lower taxes than what the state government did.

So before looking at the questions think for a second what you need. The answer should show why people would pay back more state taxes then they would federal taxes.

If you alread have this in mind before looking at the answers then you wont get distracted easily.

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

Does this give a reason why people would pay back state tax but not federal tax? No, so move on.

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

This addresses people paying state and federal tax but it argues the opposite and weakens.

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

The fees will be abolished so this is irrelevant.

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.

Doesn't address why people would pay more of one over the other.

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.

Bingo! The people who do not pay their state tax do so because they forget not because they were unwilling. These peopel would surely pay once they are reminded and given the opportunity to do it penalty free. It also implies that dont pay federal tax do so because they intentionally dont want to. These people are far less likely to repay once penalties are removed because they didn't want to pay in the first place when there were no penalties.

If you already have an ideal of what your looking for it is easier to spot in a crowd than if you just go through them one by one and decide if they make sense or not.
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Re: In order to raise revenue, the federal government planned a [#permalink]

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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.

So, I think most tax delinquents don't pay fed taxes because they decide not to, or simply put, don't want to pay.
Those who don't pay state taxes are mostly forgetting to pay, not because they don't want to pay.
Two different attitudes, why should the same method work for both?

I think it is E.
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Re: In order to raise revenue, the federal government planned a [#permalink]

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Hi Milan & Tomas,

Let me see if I can help you both....

Answer C is not correct in my opinion because as previously stated the fees are being abolished. The question of whether there are more or less state/federal avoiders is in my opinion just speculation.

Answer E does strengthen, because whilst Milan may have a point that SOME State avoiders will forget again, overall it is more likely that becuase people have decided consciously to break the law that they will keep that same opinion even when faced with an amnesty. If people have forgotten, they're likely to be happy with the route out of their dilemma (because they normally want/are happy to pay tax).

Hope that helps.

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

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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.


The answer here is E.

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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New post 14 Aug 2014, 13:15
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.

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

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New post 29 Sep 2014, 14:33
sowragu wrote:

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..


You are right that C doesn't make sense under a zero penalty situation. The question asks us to find support for the states getting a higher percentage of taxes owned, so when we say C doesn't make sense, we mean that economists would not use this argument to explain how states would receive a higher percentage of tax owed. Choice C would be an excellent argument for why the federal government would received the higher percentage of tax, but that is not the question. C is not correct.

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

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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.
out of context

B. Most people who honestly pay their state tax are equally honest in paying their federal tax.
again out of context.. we are looking at a relationship between defaulters at federal and state level

C. Although federal tax delinquents usually must pay high financial penalties, the states require far lower financial penalties.
this would rather lead to opposite of economists projection

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 context

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.
CORRECT...this is the difference we are looking for
ans E
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happyface101 - Your reasoning above isn't bad, but you are falling into a common CR trap: gross amounts v. proportions. Your argument could potential be viable if we were talking about gross amount (but even then you have to consider the scale of the entire government v. a single state). The argument, however, states that economists believe that "the federal government would collect a far lower percentage of total tax owed", so it doesn't matter that there may be FEWER tax evaders due to the high penalties involved because we are comparing the proportion collected of total tax owed.

Remember also that we are looking for the BEST answer. Many times in CR you will be faced with multiple answers that seem correct. When you find that you have chosen incorrectly, your job is not to try and justify your answer; rather, you need to go back and teach yourself why the correct answer is correct. Try it! Now that you know that E is the correct answer, analyze it logically to determine why it is the best answer.

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

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New post 11 Oct 2016, 09:13
Hi everyone,

Here's my video explanation of the question. Hope you enjoy!



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

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New post 19 Oct 2016, 06:28
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.


The arguments is comparing percentages, not absolute quantities.

Most people agree that the answer is either C or E

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

The higher the penalties, the stronger the reasons to pay on time. Then there would be fewer delinquents. However, we do not know if these delinquents are going to pay.

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.

If most state tax delinquents failed to pay state tax because of an oversight (let’s say 80%). These delinquents are likely to pay the tax owed (let’s say 90%), and the rest (20%) failed to pay because they did not want to pay. These delinquents are not likely to pay the tax owed (let’s say that only 10% paid). So, from 100 delinquents 80% * 90% (because of an oversight) + 20% * 10% (because they did not want to pay) = 72% + 2% = 74% state tax delinquents would pay.

If few federal tax delinquents failed to pay state tax because of an oversight (let’s say 20%). These delinquents are likely to pay the tax owed (let’s say 90%), and the rest (60%) failed to pay because they did not want to pay. These delinquents are not likely to pay the tax owed (let’s say that only 10% paid). So, from 100 delinquents 20% * 90% (because of an oversight) + 80% * 10% (because they did not want to pay) = 18% + 8% = 26% federal tax delinquents would pay.

So, the federal government would collect a far lower percentage of total tax owed by delinquents.

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

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New post 13 Nov 2017, 12:19
Poorvasha wrote:
Hi,
mikemcgarry,
Would request your help with this one.

E states that "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". Is it wrong to assume here that the federal tax delinquents were unwilling to pay because of the high penalty and now since there is no penalty, they would instead end up paying it ?

Thanks in advance! :)

Dear Poorvasha,

I'm happy to respond. :-)

(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 told that "state tax delinquents fail to pay state tax because of an oversight," this is, a mistake. These people were intending to pay, and just made a mistake, overlooking their state taxes. The word "oversight" connotes unintentionality: these people failed to pay by accident: this suggests that many would like to rectify that accident and do what they previously unintentionally overlooked.

By contrast, (E) suggest that "most federal tax delinquents . . . fail to pay state tax because of . . . a decision not to pay." That's different. These people did not make a mistake or fail to pay by accident. These people made a conscious decision not to pay. This decision would not have been based on the penalties for lateness, because these people made the decision before anything was late. We don't really know why they so consciously chose not to pay--maybe sudden poverty, maybe because their income was illegally gained, etc. The decision may well be rooted in some aspect of their lives, and the presence or absence of the late penalties is not going to change those life circumstances.

Does all this make sense?
Mike :-)
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Re: In order to raise revenue, the federal government planned a   [#permalink] 13 Nov 2017, 12:19
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