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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 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

Last edited by mikemcgarry on 13 Nov 2017, 12:09, edited 2 times in total.
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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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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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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.
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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.

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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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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.

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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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saravalli 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.


E
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(C) clearly states that the federal penalties were higher than that of the state penalties so the delinquent cases found the offer good enough to repay the federal one.
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Re: In order to raise revenue, the federal government planned a [#permalink]

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samatace wrote:
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.


One for E, C does not make sense and is really out of scope. This is just a fact.


IMO its C, if delinquents are not paying for lower penalties in state, they shall certainly not pay for higher penalties in federal taxes.
For E, even if they had an oversight in state taxes, what makes it compelling that they will again have an oversight in Federal Taxes as well?

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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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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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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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Dienekes wrote:
Considering I got this as the first question on GMAT Prep test #3, I was wondering can actual GMAT too put a 700-level question as the first one? I got it right, though took >2 mins to solve.


It would be a bit surprising to see a really hard one at the start of the GMAT as that would go against the general algorithm of the CAT (see this article on MBA.com: http://www.mba.com/us/the-gmat-blog-hub ... -gmat.aspx). That said, the GMAT mixes things up all the time so it's wouldn't be out of the question for them to alter the structure a bit without changing how the exam works overall. The basic gameplan of the GMAT stays the same - don't spend too long on any problem, even if it is the first problem you see!

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Danuthan wrote:
Can someone please explain why D is out of scope?

I thought that if the tax rates are different in each states, then people will be more willing to pay the tax according to the rates that the are supposed to pay. Whereas federal tax requires all citizen to pay the same amount of tax, which to some may be higher that their state's tax rate.

Thanks,

DT


Hi,
the tax for state varies doesnt mean it will be more than federal tax. The statment doesn't give the reason why people will pay state tax but not federal tax. Hence , the provided info is irrelevant.
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i think E as well

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OA?
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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?
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