Ten years ago, the total share of federal, state, and local taxes

Question

Ten years ago, the total share of federal, state, and local taxes was 23 percent of the nation’s Gross National Product. Now, that share has decreased to 21 percent.

Which one of the following can be properly inferred from the facts given above?

(A) The total amount of federal, state, and local taxes paid now is less than the amount paid ten years ago.
(B) On average, people now have a better standard of living than they did ten years ago.
(C) The average taxpayer keeps a greater percentage of income for his own use than he did ten years ago.
(D) Federal, state, and local governments have reduced the level of services they offer to constituents.
(E) Inefficiency and fraud have been reduced in government services.

stne · Answer

How can we really infer C 
earlier it was 23% now it is 21%
it could mean that the total share of F, S and local taxes decreased with respect to GDP it could also mean that F S and Local taxes remained constant but GDP increased .
C and A seems similar, if the average tax payer keeps a greater percentage of his income then it means that he is paying less tax now than he paid 10 years ago.
So taxes in effect decreased.

Am I missing something, percentage questions tend to be tricky.

guptarahul · Answer

(A) The total amount of federal, state, and local taxes paid now is less than the amount paid ten years ago. Incorrect ( May be GNP increased so much in 10 years that today's gnp's 21% is greater than that of 10 year before gnp's 23%)

(B) On average, people now have a better standard of living than they did ten years ago. It can be right

(C) The average taxpayer keeps a greater percentage of income for his own use than he did ten years ago. Correct

(D) Federal, state, and local governments have reduced the level of services they offer to constituents. Incorrect

(E) Inefficiency and fraud have been reduced in government services. Out of Scope

Between B and C, C seems to be more appropriate.

KUDOS

arvind910619 · Answer

Although i got it right , but please post official explanation.

rohan2345 · Answer

Hi Arvind,

Sure. Here is the official Explanation

If the various levels of government collect a smaller share of the GNP through taxes, then the average taxpayer keeps a larger share. The answer is (C). Be careful of choice (A): it commits an error by failing to distinguish between percentage and amount. While the percentage share of taxes has decreased, the overall amount of tax revenue could have increased if the GNP is larger than it was ten years ago. The other choices can not be logically inferred from the passage. Each choice offers a possible cause or effect of the tax reduction, but none of these must occur.

Hope this helps. All the best.

TheMechanic · Answer

This question can convincingly be solving using POE. Option C doesn't jump out to me as correct answer choice. Option C states that Tax payers are paying lesser percentage from their income. But the issue is, it could be possible that an average tax payer's income has increased, and now even a smaller percentage equates to the same percentage contribution as before. Hence there isn't any change in the total money contributed via taxes. But still the total %tage contribution to GNP is lower. This could be because other parts contributing to 100% GNP might have grown in percentage, there by increasing the total $$ of GNP of which taxes, since the same as before, now forms a smaller percentage. It's a "could be" scenario hence option C is not 100% convincing.

i hope it makes sense. Let me know, if I am wrong somewhere?

i hope it makes sense. Let me know, if I am wrong somewhere?

sobby · Answer

By POE we can get to C ...
While solving infer question based on percentage.I always try to avoid answer choices reflecting numbers (such as here we can see "total amount" in answer choice A).Correct answer choice in these type of question almost always deal in fraction , ratio or percentage .

jackspire · Answer

Hello  stne ,

Let me put my cents here. Suppose GDP increased. Tax contribution might have increased proportionately as the argument has not disclosed any Tax variation in the mentioned period.
Another thing might have happened. People might have shown a greater percentage of their income as various investments and paid less tax.
I am an Engineer working in an Indian Manufacturing Company. I pay my tax considering my income slabs, accepted exemption and total amount of investment. As per this argument, first 2 elements remain same. So, my tax proportion may vary considering the proportion of my investment.
If I am investing more, I am paying less tax.
Considering my real life scenario I went for option C.

Hope, it helps.
Not an expert. We can argue.

Himanshi24sharma · Answer

Ten years ago, the total share of federal, state, and local taxes was 23 percent of the nation’s Gross National Product. Now, that share has decreased to 21 percent.

Which one of the following can be properly inferred from the facts given above?

(A) The total amount of federal, state, and local taxes paid now is less than the amount paid ten years ago.  Incorrect. The percentage of taxes does not tell us anything about the tax amount. Here, we are comparing ONLY the percentages of taxes now vs 10 years ago. The actual amount of taxes now could be less or more than that tax amount 10 years ago.

(B) On average, people now have a better standard of living than they did ten years ago.  Incorrect. This does not definitively tell us that spending less on taxes leads to people spending more on improving their standard of living. People may be spending their money somewhere else - investments, debt repayment.

(C) The average taxpayer keeps a greater percentage of income for his own use than he did ten years ago.  Correct. If the overall percentage of taxes is reduced from a country's GNP, we can infer that an average taxpayer's percentage of tax paid has reduced as well. The country's tax percent is an aggregation of percentage of taxes paid by individual citizens.

(D) Federal, state, and local governments have reduced the level of services they offer to constituents.  Incorrect. We can't definitely infer that the taxes are lower because of a reduction in services provided by the govt.

(E) Inefficiency and fraud have been reduced in government services.  - Incorrect. This is not in the scope of the argument.

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot: 

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

 This post was generated automatically.

Ten years ago, the total share of federal, state, and local taxes

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Ten years ago, the total share of federal, state, and local taxes

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards