Economist: Currently, many countries rely primarily on taxing income

Question

Economist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving their economies, and the only way to accomplish this is to increase their savings rates. Hence, ________

Which one of the following most logically completes the economist's argument?

(A) most governments should stop taxing savings and investment
(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment
(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures
(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income
(E) it is detrimental to the economic improvement of any country to continue to tax income

Source: LSAT

Kurtosis · Answer

Tax Income --> Does not promote savings
Tax Consumption --> Promotes savings

(A) most governments should stop taxing savings and investment - Governments are not taxing savings and investment. They are taxing the income. Out of context.

(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment - Pace of improvement is not the focus of the argument.

(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures - We cannot infer this.

(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income - Correct.

(E) it is detrimental to the economic improvement of any country to continue to tax income - The argument focuses on promoting savings to improve the economy. Doesn't say taxing income is detrimental to the economy.

Answer: D

gmatexam439 · Answer

Economist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving their economies, and the only way to accomplish this is to increase their savings rates. Hence, ________

Which one of the following most logically completes the economist's argument?

(A) most governments should stop taxing savings and investment - Out of context 
(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment - We don't know whether the economies WILL improve 
(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures - ALONE? extreme 
(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income - Correct 
(E) it is detrimental to the economic improvement of any country to continue to tax income - Opposite of what the argument is stating

US09 · Answer

Narrowed it down to B & D but eventually D because B talks about countries (argument is about many countries, not all) in general & in exaggeration (says "rapidly improve") and not the specific countries that impose tax on income.

gmatexam439 · Answer

Eсonomist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving theiir economies, and the only way to accomplish this is to increase their savings rates. Hence, _____________

Which one of the following most logically completes the eсonomist' s argument?

(A) most governments should stop taxing savings and investment
 This is an exaggerated statement

(B) the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment
 This is a hypothesis. Out of scope

(C) in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures
 This is an exaggerated choice

(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income
 Correct

(E) it is detrimental to the economic improvement of any country to continue to tax income
 This is opposite of what is stated in the passage

unraveled · Answer

Economist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving their economies, and the only way to accomplish this is to increase their savings rates. Hence, ________

Which one of the following most logically completes the economist's argument?

(A)  most governments should stop  taxing savings and investment - WRONG. Why "most" when it can't be equal to "many"? 
(B) the  economies of countries will rapidly improve  if their governments adopt tax policies that encourage savings and investment - WRONG. Improvement is not sure and rapidly only increases the uncertainty. 
(C) in  most countries taxes on consumption alone could raise adequate revenues  to fund government expenditures - WRONG. Again "most" is wrong to say and "alone" too is extreme. 
(D) the tax laws of many countries should be revised to focus on taxing consumption rather than income - CORRECT. A more sobre claim.
(E) it is  detrimental to the economic improvement  of any country to continue to tax income - WRONG. Again makes a similar mistake as others do.

Answer D.

Economist: Currently, many countries rely primarily on taxing income

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Economist: Currently, many countries rely primarily on taxing income

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