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Senator: The average per capita after tax income for

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Re: Senator: The average per capita after tax income for  [#permalink]

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New post 05 Oct 2015, 00:55
Senator : The average per capita after-tax income for residents of Eastbury is $30,105. 2 years ago, it was 11% lower.
This can be directly attributed to the comprehensive set of tax cuts that I helped get approved in congress.

Assumptions: only tax cuts are responsible for increase in per capita income and nothing else.

Which of the following statements, if true, most strengthens the conclusion drawn by the senator?

a) The average per capita after-tax income for the residents of Eastbury who fall below the poverty line increased by 16% in the last 5 years.
(this creates a paradox of why it was less 2yrs ago and increased now.)
b) The senator has not personally benefited from the tax cuts.
(OFS)
c) The number of residents of Eastbury has not substantially changed in the last two years.
(This can strengthen saying population condition remained same without affecting the percapita income but does not reveal much info.)
d) The federal tax rate rose 6% during the 4 years prior to the implementation of the tax cuts.
(what happened prior to tax cuts is not necessary.OFS)
e) A recent changes in the estate laws did not substantially increase the average per capita income before-tax income of the residents of Eastbury
(This supports our assumption that no other changes increased the income except tax cuts)
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Re: Senator: The average per capita after tax income for  [#permalink]

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New post 05 Oct 2015, 11:26
Senator : The average per capita after-tax income for residents of Eastbury is $30,105. 2 years ago, it was 11% lower. This can be directly attributer to the comprehensive set of tax cuts that I helped get approved in congress.


Let Income before Tax be $ 10000
Tax be $ 1000 ( let Tax rate be 10% )
After tax Income is = $ 9900
Let there be 10 Residents , so average per capita after-tax income is $ 990 ( 9900/10)

Now comes the catch - 2 years ago, it was 11% lower , it means the After tax Income was 11% of 990 ( average per capita after-tax ) ie $ 9801.10

The Senator claims that he made comprehensive Tax cuts , so -

Lets say he reduced taxes from 15% to 10% ( tax cut by 5%) , considering other factors ( like change in income & change in population ) same the revised calculations are -

Income before Tax be $ 10000
Tax be $ 1500( earlier Tax rate is 15% )
After tax Income is = $8500
Let there be 10 Residents , so average per capita after-tax income is $ 850 ( 8500/10)

So there is an increase in Per capita Income after tax cuts.


Why E not C ?

C states - The number of residents of Eastbury has not substantially changed in the last two eyars

Substantial change can either be increase or decrease !!

1. If the population increases (Substantially ), then Per Capita after Tax Income will be less/equal/negative
2. If the population decreases (Substantially ), then Per Capita after Tax Income will be More

There are 2 possiibilities for option (C)

E states - A recent changes in the estate laws did not substantially increase the average per capita income before-tax income of the residents of Eastbury

This looks a balanced assumption, there is only one possibility -

1. Moderate increase in average per capita income before-tax - Will lead to an increase in per capita Income after Tax Cuts


Hence I stongly go for (E)
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Joined: 02 Sep 2017
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Re: Senator: The average per capita after tax income for  [#permalink]

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New post 26 Oct 2017, 11:12
Can an expert pls pitch in as I think it is C?
Re: Senator: The average per capita after tax income for &nbs [#permalink] 26 Oct 2017, 11:12

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