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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Thanks and Regards

Abhishek....

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