Mayor of town T decided to lower the sales tax in order to boost the

Question

The mayor of town T decided to lower the sales tax in order to boost the sales volume and therefore increase the budget by eventually receiving more sales tax as the result of the increased sales volume. The mayor wants to follow the example of town J, where such an experiment helped increase the budget twice in a three-year term.

Which of the following statements is the best proof that the opponents to the mayor's proposal can use in order to persuade the population of town T not to support this decision?

(A) Town J is located very close to the borders of other three states, which causes residents of other states to shop in town J, as the sales taxes in those other states are higher than in this state. Town T is located far from any state border.

(B) Town T is not big enough to make the difference of the sales tax received to budget positive as the result of the proposed change.

(C) Town J has many more industrial plants that purchase raw materials from the town's mines.

(D) This kind of an experiment did not work in any other of the six towns that lowered the sales tax.

(E) The mayor is corrupted by several groups of residents of town T. These groups are highly interested in lowering the sales tax as the move will make them much richer.

infowarf · Answer

For me the correct answer is B for the following reasons:

A. says that town J got richer thanks to other 3 states which shop from town J. Town T is far from any state. First of all, we have no idea about the volumes of Town J. Maybe it's large enough to be self-satisfying. Secondly, we do not know the percentage decrease of town J taxes and we assume that town T will cut its taxes equally. Maybe town J cut its taxes by an unprecedented proportion, and town T will cut only by let's say 10%.

B. Town T is not big enough to make the difference of the sales tax received to budget positive as the result of the proposed change.
Literally tells us that town T is unable to earn due to the proposed change. How is not this weakening the mayor's position.

Bunuel  please explain.

mavrck0102 · Answer

Option B says that "Town T is not big enough to make the difference of the sales tax received to budget positive" which means the difference from sales tax wont be big enough to make the budget positive, just because budget is negative does not mean that budget did not increase. Hope this helps

JuniqueLid · Answer

I share the thinking of marvrck0102. Could someone please help evaluate this:

B) is a stronger answer than A).

Because whilst A) is a strong rebuttal to the mayor’s analogy, it fails to prove the policy will fail. Whilst T lacks the geographical advantage that J has, T could still succeed if it has strong enough internal demand.

Admittedly B) is somewhat vague, but B) directly states that Town T’s economy is too small to generate a positive net impact - no matter what happens, the tax cut cannot increase overall revenue, then the proposal is fundamentally flawed. Even if T has the same geographic advantage J has, T's economy is too small to handle it would still prevent the intended goal of the mayor's proposal to be achieved. The mayor’s logic rests on the assumption that increased sales volume will compensate for the lower tax rate. If Town T’s economic scale is insufficient, that assumption collapses, and the policy will fail.

Saitama1629 · Answer

I believe B is flawed because it only consider the impact within the geographical bounds of state T, because lower taxes can also give a boost to export from a city to other, which is mentioned in option A.

ayusshhhh · Answer

The mayor of town T decided to lower the sales tax in order to boost the sales volume and therefore increase the budget by eventually receiving more sales tax as the result of the increased sales volume. The mayor wants to follow the example of town J, where such an experiment helped increase the budget twice in a three-year term.

Argument -  Decreasing sales tax will increase sales which will lead to more tax collected and help increase the budget

(A) Town J is located very close to the borders of other three states, which causes residents of other states to shop in town J, as the sales taxes in those other states are higher than in this state. Town T is located far from any state border.
--  tells demographic positives of town J which cannot be replicated in town T, lets keep this answer

(B) Town T is not big enough to make the difference of the sales tax received to budget positive as the result of the proposed change.
--  Town T's size doesn't matter, the budget will be proportional to size (small town less budget, big town high budget) but sales boost will have impact on budget and that link is missing here - Eliminate

(C) Town J has many more industrial plants that purchase raw materials from the town's mines.
--  Out of Scope

(D) This kind of an experiment did not work in any other of the six towns that lowered the sales tax.
--  Reason is not given here, very vague argument - Eliminate or keep low priority

(E) The mayor is corrupted by several groups of residents of town T. These groups are highly interested in lowering the sales tax as the move will make them much richer.
--  Doesn't address revenue or budget aspect - Eliminate

Hence  A  is the most suitable answer

Mayor of town T decided to lower the sales tax in order to boost the

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Mayor of town T decided to lower the sales tax in order to boost the

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