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# V10-16

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Founder
Joined: 04 Dec 2002
Posts: 17077
Location: United States (WA)
GMAT 1: 750 Q49 V42
V10-16  [#permalink]

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17 Aug 2015, 11:20
00:00

Difficulty:

25% (medium)

Question Stats:

77% (00:52) correct 23% (00:44) wrong based on 52 sessions

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Politician: In order to reduce our state’s budget deficit, we should lower corporate taxes on businesses that operate within the state. If businesses have lower taxes, they will use their increased profits to hire more workers, which will increase the amount of income taxes that the state collects.

Which of the following is an assumption the politician makes in his argument?

A. The reduction in the amount of corporate taxes collected by the state will be less than the increase in the amount of income taxes collected by the state
B. Businesses that hire more workers are eligible for a tax credit from the state
C. The minimum wage in the state is lower than average when compared to other states in the country
D. The businesses affected by the lower taxes will favor returning their increased profits to their shareholders rather than reinvesting in their operations
E. The state’s budget deficit has grown this year when compared to last year

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Founder
Joined: 04 Dec 2002
Posts: 17077
Location: United States (WA)
GMAT 1: 750 Q49 V42
Re V10-16  [#permalink]

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17 Aug 2015, 11:20
Official Solution:

Politician: In order to reduce our state’s budget deficit, we should lower corporate taxes on businesses that operate within the state. If businesses have lower taxes, they will use their increased profits to hire more workers, which will increase the amount of income taxes that the state collects.

Which of the following is an assumption the politician makes in his argument?

A. The reduction in the amount of corporate taxes collected by the state will be less than the increase in the amount of income taxes collected by the state
B. Businesses that hire more workers are eligible for a tax credit from the state
C. The minimum wage in the state is lower than average when compared to other states in the country
D. The businesses affected by the lower taxes will favor returning their increased profits to their shareholders rather than reinvesting in their operations
E. The state’s budget deficit has grown this year when compared to last year

(A) Correct. The politician says that the policy will increase the overall amount of tax revenue collected. Since the state will be collecting less in corporate taxes, it has to make up this difference through individual taxes.

(B) This answer choice is irrelevant.

(C) This answer choice is irrelevant.

(D) This would weaken the conclusion, since it indicates that the businesses that save on taxes will not hire more workers, but instead return their increased profits to their shareholders.

(E) This answer choice is irrelevant.

Answer: A
_________________

Founder of GMAT Club

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Intern
Joined: 04 Apr 2016
Posts: 4
Re: V10-16  [#permalink]

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11 May 2016, 07:28
I think this the explanation isn't clear enough, please elaborate.
Intern
Joined: 17 Dec 2013
Posts: 4
Concentration: Strategy, Social Entrepreneurship
GMAT Date: 03-03-2014
Re: V10-16  [#permalink]

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09 Nov 2017, 01:25
Why is D wrong can you elaborate on this
Re: V10-16 &nbs [#permalink] 09 Nov 2017, 01:25
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# V10-16

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