MBA Spotlight – The Biggest MBA Fair is June 13-14
close
It is currently 29 May 2023, 06:05
Register
GMAT Club Tests
Decision Tracker
My Rewards
New posts
New comers' posts

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Go to My Error Log Learn more
Close

Request Expert Reply

Confirm Cancel

Raising the tax rate on essential goods—a traditional means of increas

7 posts Go to First Unread Post
Print view
NEW TOPIC
POST REPLY
Downloads
My Bookmarks
Reviews
SORT BY:
Date
Kudos
User avatar
L
Bunuel
Math Expert
Joined: 02 Sep 2009
Posts: 88712
CAT Tests Forum Quiz Mode Top Member of the Month
Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  30 Mar 2020, 05:21
1
Kudos
4
Bookmarks
Expert Reply
Quiz Dashboard Attempt only this question Same topic and source Same topic and difficulty Same source and difficulty Random Chronological Reverse chronological Learn more
00:00
A
B
C
D
E

Difficulty:

55% (hard)

Question Stats:

63% (02:07) correct 37% (02:08) wrong based on 379 sessions

Hide Show timer Statistics

Raising the tax rate on essential goods—a traditional means of increasing government revenues—invariably turns low- and middle-income taxpayers against the government. Hence government officials have proposed adding a new tax on purchases of luxury items such as yachts, private planes, jewels, and furs. The officials claim that this tax will result in a substantial increase in government revenues while affecting only the wealthy individuals and corporations who can afford to purchase such items.

The answer to which one of the following questions would be most relevant in evaluating the accuracy of the government officials’ prediction?


(A) Will luxury goods be taxed at a higher rate than that at which essential goods are currently taxed?

(B) Will the revenues generated by the proposed tax be comparable to those that are currently being generated by taxes on essential goods?

(C) Will sales of the luxury items subject to the proposed tax occur at current rates once the proposed tax on luxury items has been passed?

(D) Will the proposed tax on luxury items win support for the government in the eyes of low- and middle-income taxpayers?

(E) Will purchases of luxury items by corporations account for more of the revenue generated by the proposed tax than will purchases of luxury items by wealthy individuals?
ShowHide Answer
Official Answer
Official Answer and Stats are available only to registered users. Register/Login.

_________________
New to the GMAT CLUB Forum?

My Signature Questions' Collection:


What are GMAT Club Tests?
Extra-hard Quant Tests with Brilliant Analytics
Signature Read More
Quiz Dashboard Attempt only this question Same topic and source Same topic and difficulty Same source and difficulty Random Chronological Reverse chronological Learn more
request expert reply
avatar
G
Shahalikhan
Manager
Manager
Joined: 08 Jul 2019
Posts: 74
Location: United Kingdom
Concentration: Strategy, General Management
Schools: Anderson '24 Booth '24 CEIBS '24 Columbia CBS '24 Copenhagen Goizueta '24 ESADE Foster '24 Fuqua '24 Haas '24 Harvard '24 HKUST IESE '24 IMD '22 ISB '23 Johnson '24 Judge '23 Kellogg '24 Kenan-Flagler '24 LBS '24 BYU McCombs '24 McDonough '24 NTU NUS Said '23 Ross '24 Rotman '24 Erasmus Bocconi Sloan '24 Stanford '24 Tepper '24 Tuck '24 Warwick "23 Wharton '24 Yale '24
GMAT 1: 710 Q50 V37
GPA: 3.51
WE:General Management (Computer Software)
GMAT ToolKit User
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  30 Mar 2020, 05:53
it must be related to the number of purchases of wealthy items.

option b and c remains


out of which option c seems more accurate
avatar
B
Ted2007
Intern
Intern
Joined: 02 Jul 2018
Posts: 8
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  10 Apr 2020, 13:18
C.
In other to evaluate the officials' claim that the increased tax on luxary item can increase, it is important to evaluate his assumption.

The increased tax can increase the income can be hold only if it won't be offset by decreased sales in luxary item, therefore, c is crucial for evaluating the assumption.

Posted from my mobile device
User avatar
P
bidskamikaze
Senior Manager
Senior Manager
Joined: 07 Jan 2018
Posts: 269
Location: India
Schools: ESMT NUS '22 IIMA PGPX'23 NTU
GMAT 1: 710 Q49 V38
GMAT ToolKit User
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  04 Mar 2021, 00:40
Bunuel wrote:
Raising the tax rate on essential goods—a traditional means of increasing government revenues—invariably turns low- and middle-income taxpayers against the government. Hence government officials have proposed adding a new tax on purchases of luxury items such as yachts, private planes, jewels, and furs. The officials claim that this tax will result in a substantial increase in government revenues while affecting only the wealthy individuals and corporations who can afford to purchase such items.

The answer to which one of the following questions would be most relevant in evaluating the accuracy of the government officials’ prediction?


(A) Will luxury goods be taxed at a higher rate than that at which essential goods are currently taxed?

(B) Will the revenues generated by the proposed tax be comparable to those that are currently being generated by taxes on essential goods?

(C) Will sales of the luxury items subject to the proposed tax occur at current rates once the proposed tax on luxury items has been passed?

(D) Will the proposed tax on luxury items win support for the government in the eyes of low- and middle-income taxpayers?

(E) Will purchases of luxury items by corporations account for more of the revenue generated by the proposed tax than will purchases of luxury items by wealthy individuals?


Even though I marked option B, I now understand why option C is correct after giving some careful thought.

(B) Will the revenues generated by the proposed tax be comparable to those that are currently being generated by taxes on essential goods?
Even though this option seems very tempting, notice that revenues generated by the proposed tax might be very much higher than the current revenue.
This option says questions whether revenues will be COMPARABLE, but the revenues might not be comparable, yet sufficiently high. That is the reason this choice is incorrect.

(C) Will sales of the luxury items subject to the proposed tax occur at current rates once the proposed tax on luxury items has been passed?
One may question whether we can apply a similar logic, as we did for option B, on this option.
However, notice that the sales cannot increase BECAUSE of the tax increase. It might increase because of some other external factors, but not because of tax INCREASE.
So, it is reasonable to think that if the the sales do not decline then, most probably, the tax revenues will increase.

Option C is therefore correct. :)
User avatar
D
GMATGuruNY
VP
VP
Joined: 04 Aug 2010
Posts: 1256
Schools:Dartmouth College
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  04 Mar 2021, 06:34
3
Kudos
1
Bookmarks
Expert Reply
Plan:
Rather than raising the tax rate on essential goods, government officials have proposed adding a new tax on purchases of luxury items.

(B) Will the revenues generated by the proposed tax be comparable to those that are currently being generated by taxes on essential goods?

Note the difference between the blue portion in the passage and the red portion in B.
Since the conclusion is that adding a new tax on luxury items is preferable to RAISING THE TAX RATE ON ESSENTIAL GOODS, the portion in red -- which refers to the CURRENT tax rate -- is irrelevant.

Eliminate B.
_________________
Private tutor exclusively for the GMAT and GRE, with over 20 years of experience.
Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
My students have been admitted to HBS, CBS, Tuck, Yale, Stern, Fuqua -- a long list of top programs.

As your tutor, I won't simply teach you how I would approach problems.
I'll unlock the best way for YOU to solve problems.
Available all over the world for virtual sessions and in NYC for live sessions.
For more information, please email me at GMATGuruNY@gmail.com.
Signature Read More
avatar
B
shrgmat
Intern
Intern
Joined: 11 Nov 2020
Posts: 46
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  04 Sep 2021, 16:27
GMATGuruNY wrote:
Plan:
Rather than raising the tax rate on essential goods, government officials have proposed adding a new tax on purchases of luxury items.

(B) Will the revenues generated by the proposed tax be comparable to those that are currently being generated by taxes on essential goods?

Note the difference between the blue portion in the passage and the red portion in B.
Since the conclusion is that adding a new tax on luxury items is preferable to RAISING THE TAX RATE ON ESSENTIAL GOODS, the portion in red -- which refers to the CURRENT tax rate -- is irrelevant.

Eliminate B.


Sorry; there is no conclusion in the argument. They don’t even use the word ‘preferable’. We have to evaluate a claim. Claim is that the govt revenue will substantially increase. B - what does comparable revenue mean? Higher, lower, equal - we don’t know.
Only C can result in substantial increase as the claim says. So, question C is the most relevant.

Posted from my mobile device
User avatar
P
TheGraceful
Senior Manager
Senior Manager
Joined: 10 Apr 2018
Posts: 353
Concentration: Leadership, Strategy
Schools: Booth Wharton Kellogg LBS '24 INSEAD
GMAT 1: 600 Q44 V28
GPA: 3.56
WE:Engineering (Computer Software)
Reviews Badge
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink] New post  07 Sep 2021, 09:59
Ted2007 wrote:
C.
In other to evaluate the officials' claim that the increased tax on luxary item can increase, it is important to evaluate his assumption.

The increased tax can increase the income can be hold only if it won't be offset by decreased sales in luxary item, therefore, c is crucial for evaluating the assumption.

Posted from my mobile device


Took a little time to understand. However, the explanation made sense to me.
Thanks.
_________________

The Graceful
----------------------------------------------------------
Every EXPERT was a beginner once...
Don't look at the clock. Do what it does, keep going..
To achieve great things, two things are needed:a plan and not quite enough time - Leonard Bernstein.
Signature Read More
GMAT Club Bot
gmatclubot
Re: Raising the tax rate on essential goods—a traditional means of increas [#permalink]
07 Sep 2021, 09:59
NEW TOPIC
POST REPLY
Downloads
My Bookmarks
Reviews
Moderators:
GMATNinja
GMAT Club Verbal Expert
6428 posts
GMATNinjaTwo
GMAT Club Verbal Expert
238 posts
mysterymanrog
CR Forum Moderator
442 posts

cron

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne
Main navigation
GMAT Resources
Partners
MBA Resources
www.gmac.com|www.mba.com | | GMAT Club Rules | Terms and Conditions