Reading Comprehension

PT147 · S3 · P4 · Q25 Flat Tax Systems

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Passage A

Passage A

This author is happy with the flat tax system and thinks that its usage so far in Estonia and the eight countries that followed is evidence that the flat tax system can successfully work in the real world:

- seems to be working as well in practice as it does on the blackboard (end of P1) - practical types who said flat taxes cannot work offer a further objection, once they are shown such taxes working

The author presents an Objection to flat tax systems in the 2nd paragraph, , and then the author responds to that objection in the 3rd paragraph.

Since you can exempt a bottom layer of money, you can keep the poorest people from paying any tax. And since the tax code is so greatly simplified, rich people end up paying their correct share, rather than hiring fancy tax lawyers to seek loopholes allowing them to avoid paying their full tax.

Passage B

This author prefers graduated tax systems over flat tax systems. He starts by defending graduated taxes, by Clarifying a Misconception.

Misconception -- in a graduated system, richer people pay a higher tax rate on their whole earnings than poorer people do. Reality -- in a graduated system, you only pay a higher tax rate on the dollars you make over a certain threshold.

The 2nd paragraph explain the logic behind this system: the first $20,000 you make (for example) goes straight to survival expenses like food / shelter / clothing. Taking some of that for tax would make life far harder. Once you've already made $50,000 (for example) then the next $20,000 aren't as essential to you. If you only got $14,000 of it you'd probably still be fine: middle-income earners have much greater flexibility in absorbing small fluctuations in income.

The last paragraph is where the author of B starts Challenging the Position of flat taxers. He basically is saying that flat tax recognize the logic of the 2nd paragraph, but their system is just less nuanced than it could be, and the effect is worse on the middle class.

25.

Which one of the following is a conclusion for which passage A argues but that passage B does not address?

  1. that exempting a threshold amount

    Addressed by B

    The author of A does seem to argue that by using the exemption threshold in different ways, you could make a system more progressive /more "fair". However, the author of B also addresses this issue in her last paragraph. When she's talking about the fact that flat tax systems often recognize the difference between survival dollars and discretionary dollars (last paragraph), she's speaking to the fairness issue. It feels less fair to take money (via tax) from people who would be spending that money on survival needs than it does to take it from wealthier people "with much greater flexibility in absorbing small fluctuations".

    18% picked this

  2. that flat tax proposals are

    Opposite of A

    The author of A tries to argue in the first paragraph that flat tax proposals are practical: "seems to be working as well in practice as it does on the blackboard".

    8% picked this

  3. that higher taxes on high-income

    Out of Scope: inhibit growth

    Neither author never talks about the possibly deleterious effects of taxing high-income earners too much.

    3% picked this

  4. Correct

    that a flat tax decreases

    Why this is right

    The last paragraph of passage A talks about how in a graduated system, the complexity of the tax code creates incentives for richer people to game the system. He concludes by saying that high-earners tend to pay about the same in a flat tax system. Even though it looks like some of their money is being taxed at a lower rate than before, their inability to find loopholes in the tax code means they can't avoid paying their full tax. Passage B never discusses people avoiding their tax.

    Skill tested: Author Opinion · how this choice captures the passage's function is the move to repeat next time.

    67% picked this

  5. that a progressive tax is

    Too Strong for Passage A

    The author of passage A seems to prefer flat tax systems, but he never tries to argue that progressive taxes are unfair. He might just find them overcomplicated and inefficient. If anything, the way he presents his 2nd paragraph "people think flat tax isn't fair because it's not progressive" and then defends flat tax in the 3rd paragraph, "a flat tax can be progressive (and thus fair)" makes it seem like the author of A doesn't have any philosophical problem with some taxpayers paying a bigger share of their income in tax than others.

    5% picked this

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