naveenban wrote:
Hi,
Can anyone provide the Official explanation of this answer.
Confused between A and C.
Hi!
Hope this helps.
The main idea of the argument is: "State revenues from the corporate income tax are decreasing".
The reason behind the decrease is that companies are reducing their taxable income since they are deducting (subtracting) the acquisiton of limousines as an expense.
Therefore, one needs to find an answer that weakens the reasoning and likely we need something related to the taxable income of the companies or to the collection of taxes levied on the taxable income. Let's review our answers:
(A) Higher personnel transport costs are offset by other savings at the new corporate headquarters
-> Incorrect. This action does not affect the taxable income of the companies or the collection of taxes. (B) Tax revenues lost from corporations leaving the state will exceed those gained if company vehicle purchases are restricted.
-> Incorrect. Seems to be a reverse answer. (C) Increased taxes are paid by the state's automobile manufacturers as a result of rising demand for limousines.
-> Correct answer. This brings new information to the argument. Although the companies under analysis are reducing their taxable income via deduction, there are other companies whitin the State (state's automobile manufacturers) that will collect a higher taxable income and therefore will be taxed on it. This offsets the lose in taxes from other companies. (D) Business executives prefer the convenience of commuting in a well-equipped limousine with a driver.
-> Incorrect. Nothing that affects the taxable income nor the taxes. (E) Corporate relocations to suburbs cause cities numerous economic difficulties.
-> Incorrect. Nothing that affects the taxable income nor the taxes.