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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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The Official Guide for GMAT Review 2018

Practice Question
Question No.: CR634
Page:

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.
[Reveal] Spoiler: OA

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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
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] 29 May 2017, 07:10
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Proponents of the recently introduced tax on sales of new luxury boats

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