generis wrote:
Many economists hold that keeping taxes low helps to spur economic growth, and that low taxes thus lead to greater national prosperity. But Country X, which has unusually high taxes, has greater per-capita income than the neighboring Country Y, which has much lower taxes. Some politicians have concluded from this that high taxes do not hinder national prosperity.
The politicians' reasoning is most vulnerable to criticism on which of the following grounds?
A) It overlooks the possibility that even if Country X reduced its taxes, it would not experience greater national prosperity in the long term.
B) It confuses a claim that a factor does not hinder a given development with the claim that the same factor promotes that development.
C) It fails to adequately address the possibility that Country X and Country Y differ in relevant respects other than taxation.
D) It fails to take into account that the per-capita income of a country does not determine its rate of economic growth.
E) It assumes that the economists' thesis must be correct despite a clear counterexample to that thesis.
CR55190.02
To better understand the flaw in the original argument, let's examine the following analogous argument:
Reducing advertising expenses helps increase profits. But Company X, which spends HUGE AMOUNTS of money on advertising, has greater profits than Company Y, which spends almost nothing on advertising. Some business professionals have concluded from this that spending a lot of money on advertising does not reduce profits. This argument incorrectly assumes that reducing advertising expenses is THE ONLY WAY to increase profits, but we all know that we can also increase profits by increasing revenue.
The same applies to the original argument.
It incorrectly assumes that having low taxes is the ONLY WAY to increase per-capita income, when there are other things that can increase per-capita income.
For example, it could be the case that Country X sits on the world's largest deposit of gold and Country Y has no natural resources, in which case Country X can't help but have a higher per-capita income, regardless of its tax rate.
For this reason, the correct answer is C.
- What you mention in the yellow is perhaps a flaw. If so, isnt that what (d) is saying ?
Based on what you said in the yellow - (d) seems to be the more appropriate answer and not (c)