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Proponents of the recently introduced tax on sales of new luxury boats

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Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 29 May 2017, 06:09
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Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue because the admittedly heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship. In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax.

The information given, if true, most strongly supports which of the following?


(A) The market for luxury boats would have collapsed even if the new tax on luxury boats had been lower.

(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.

(C) Because many people never buy luxury items, imposing a sales tax on luxury items is the kind of legislative action that does not cost incumbent legislators much popular support.

(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.

(E) Taxes can be equitable only if their burden is evenly distributed over the entire population.

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Practice Question
Question No.: CR 634
Page: 535


Luxury Boat Tax

Step 1: Identify the Question

The word supports might lead you to think that this is a Strengthen the Argument question, but the question asks which answer the given information most strongly supports. That means the correct answer will be an Inference that can be drawn from the information provided.

Step 2: Deconstruct the Argument

Luxury Boat Tax

Wealthy pay, but no suffering

But 20% industry job losses

Step 3: Pause and State the Goal

On Inference questions, look for an answer that is supported by the information in the argument. If all or part of an answer is not supported by the given information or requires additional assumptions, then that answer should be eliminated.

Step 4: Work from Wrong to Right

(A) The argument states that workers have lost their job as a result of the tax, but gives no information on the state of the luxury boat market as a whole. It's impossible to infer what would have happened to the luxury boat market with a lower tax.

(B) CORRECT. A tax will only result in an increase in tax revenue if the new revenue it generates is greater than any revenue lost. In this case, the argument specifically cites job losses due to the tax. Thus to be revenue positive the tax would have to generate more revenue than that lost from the associated job losses.

(C) The effects of a legislator supporting a luxury tax are not discussed in the argument. While this answer may seem reasonable in the real world (legislators might support a tax that only affected a few people), it cannot be inferred from the given information.

(D) This answer actually contradicts the information given; the tax burden from the new tax would fall only on the wealthy (presumably meaning only wealthy people are buying luxury boats). You cannot infer that the proponents were wrong about the wealth of people buying the boats.

(E) The passage does not state the definition of an equitable tax. You may or may not agree with the interpretation in this answer, but this opinion is not an inference from the given information.

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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 29 May 2017, 07:10
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Proponents said this tax system will help increase tax revenue. In reality, workers have lost their jobs. So, does that mean the gains will offset the losses? We need to find something of this form.

(A) The market for luxury boats would have collapsed even if the new tax on luxury boats had been lower. --> Hypothetical condition is OFS.

(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs. Yes, so benefits will be only when gains will offset the losses.

(C) Because many people never buy luxury items, imposing a sales tax on luxury items is the kind of legislative action that does not cost incumbent legislators much popular support. --> Whether they have support is OFS. we are concerned whether government will be able to increase revenue.

(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy. And now? We don't know. Don't try to break the premise.

(E) Taxes can be equitable only if their burden is evenly distributed over the entire population. --> Again, OFS. We are concerned about increasing government revenues.
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 02 Jul 2017, 03:01
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Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue (Derived statement - Intermediate conclusion based on counter premise -->) because the admittedly heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship.

In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax ( This is the conclusion - main point advocated by the author)

Inference : if these statements are true then following must also be true.
Tax will increase gov revenue only if tax gained from sale of boats will be greater than tax lost as a result of loss of workers job.
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 10 Jul 2017, 14:54
Firdaus wrote:
Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue (Derived statement - Intermediate conclusion based on counter premise -->) because the admittedly heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship.

In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax ( This is the conclusion - main point advocated by the author)

Inference : if these statements are true then following must also be true.
Tax will increase gov revenue only if tax gained from sale of boats will be greater than tax lost as a result of loss of workers job.

Thanks Firdaus for the explanation!

If anyone still has specific questions, feel free to use the request verbal experts' reply button.
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 20 Jul 2017, 11:12
how can one understand that the issue discussed is about government revenue? why D is incorrect?
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 21 Jul 2017, 16:59
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Mahamudul608 wrote:
how can one understand that the issue discussed is about government revenue? why D is incorrect?

According to the passage,

  • the new tax on sales of new luxury boats would "increase government revenue"
  • "20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax"

Quote:
(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.

Based solely on the information in the passage, we cannot assume that the government would lose any tax revenue as a result of the jobs lost by employees of luxury boat manufacturers. However, choice (B) does not necessarily say that there WILL be a tax-revenue decrease resulting from the workers' loss of jobs. Instead, choice (B) says that IF there is a tax-revenue decrease resulting from the workers' loss of jobs, the new boat tax will only produce a net gain for the government IF the revenue gained from the tax exceeds the possible revenue decrease resulting from the workers' loss of jobs.

In other words, the government should see an increase in tax revenue because of the new boat tax. But what if, for whatever reason, the new boat tax causes a DECREASE in tax revenue (i.e. resulting from workers' loss of jobs)? If that decrease exceeds the increase from the boat tax, the government would actually see a net LOSS in tax revenue. Thus, statement (B) is strongly supported by the information in the passage.

Quote:
(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.

The information in the passage does not necessarily support choice (D). Again, all we know is that the government should expect to receive new tax revenue from the boat tax and that 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a result of the new boat tax.

Why did they lose their jobs? Perhaps some people who could have afforded a luxury boat without the tax could not afford a luxury boat with the tax, causing sales and, thus, production of luxury boats to decline. Regardless of whether this theory is true, we cannot assume that the people who decided not to buy luxury boats because of the tax were not wealthy. Even if we could, we would not be able to assume that luxury boats were LARGELY bought by people who were not wealthy before the tax was instituted. There is nothing in the passage to support choice (D), so it must be eliminated.
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 21 Jul 2017, 18:20
Hi GMATNinjaTwo
Are you in line with Firdaus s explanation.
As per me there is no main conclusion in this argument and the last sentence is
a premise supporting the first statement.
Let me know your views :-)
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 21 Jul 2017, 18:28
adkikani wrote:
Hi GMATNinjaTwo
Are you in line with Firdaus s explanation.
As per me there is no main conclusion in this argument and the last sentence is
a premise supporting the first statement.
Let me know your views :-)
WR,
Arpit

I agree that the passage does not have a main conclusion. It is an inference question, and we are looking for a statement that is most strongly supported by the statements in the passage. Thanks for asking!
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 25 Jul 2017, 09:50
I think Option B is not very well formatted as it compares "yearly total revenue" with "total of any yearly tax-revenue".

Experts need help..
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 30 Jul 2017, 10:07
gmati3 wrote:
I think Option B is not very well formatted as it compares "yearly total revenue" with "total of any yearly tax-revenue".

Experts need help..

Option (B) refers to the "yearly total revenue" produced by the new tax.

We are told that 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this new tax. This loss of jobs MAY result in a decrease in tax revenue, but we can't be sure based on the information given. Perhaps none of those workers were paying taxes in the first place, and, thus, the loss of jobs will have no effect on tax revenue. Or perhaps those workers found other jobs and will end up paying the same amount in taxes.

However, maybe some or all of those workers who lost their jobs were paying taxes each year, and now the government is not going to get that money. If that's the case, we have to add up ALL of the resulting decreases and compare the total amount to the "yearly total revenue" produced by the new tax. If the yearly total revenue produced by the new tax is greater than "the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs", then the new tax will produce a net gain in tax revenue for the government.

I hope that helps!
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 02 Apr 2018, 03:44
Note:There is no conclusion here.We know that there was a tax increase on luxury boats that was only supposed to impact the wealthy. We know that 20% of the workers employed by luxury boat manufacturers were laid off. We have to determine what is true based on this.

B true. If the increased revenue generated by the tax isn't greater than the lost revenue caused by the loss of jobs, the net effect on revenue will not be positive for the government....and if not positive and this might have led to loss of jobs.
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 14 May 2018, 11:39
What does the word Equitable imply here, given that 20 % of the workers have lost their job.
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 15 May 2018, 00:55
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nahid78 wrote:
What does the word Equitable imply here, given that 20 % of the workers have lost their job.


Hey nahid78 ,

As per the argument, proponents said imposing the tax laws will be equitable(fair) to increase the revenue of government as only wealthy people will have to pay those huge taxes.

But then author also pointed out that 20% of the workers have also lost the jobs.

Note that our scope is limited to increasing the revenue of the government via these laws. Now, if we are saying government is getting the benefit even after the loss, that means overall benefit is greater than the loss we are getting. This is what option B is doing.

Remember: Despite the fact that workers are loosing jobs, author mentioned it equitable. So, we need to only revolve around this point. We should not go beyond this and think how can this be equitable. Author has mentioned some facts and we need to consider them a source of truth.

Does that make sense?
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Re: Proponents of the recently introduced tax on sales of new luxury boats  [#permalink]

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New post 26 Sep 2018, 22:53
abhimahna wrote:
Proponents said this tax system will help increase tax revenue. In reality, workers have lost their jobs. So, does that mean the gains will offset the losses? We need to find something of this form.

(A) The market for luxury boats would have collapsed even if the new tax on luxury boats had been lower. --> Hypothetical condition is OFS.

(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs. Yes, so benefits will be only when gains will offset the losses.

(C) Because many people never buy luxury items, imposing a sales tax on luxury items is the kind of legislative action that does not cost incumbent legislators much popular support. --> Whether they have support is OFS. we are concerned whether government will be able to increase revenue.

(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy. And now? We don't know. Don't try to break the premise.

(E) Taxes can be equitable only if their burden is evenly distributed over the entire population. --> Again, OFS. We are concerned about increasing government revenues.


Dear abhimahna
Is it always that a hypothetical condition is OFS? As you said above for option A?
Thanks
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Re: Proponents of the recently introduced tax on sales of new luxury boats &nbs [#permalink] 26 Sep 2018, 22:53
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