Logical Reasoning

PT21 · S3 · Q11 Raising the tax rate on essential

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Raising the tax rate on essential goods—a traditional means of increasing government revenues—invariably turns low- and middle-income taxpayers against the government.

Background

Adding a tax on essential goods makes lower income people mad at the government.

Prediction

Taxing luxury items will still raise a lot of tax revenue while only affecting the wealthy individuals and corporations who can afford this stuff.

Evaluate

We need to play along with this Plan and think of how it could fail to deliver on the predicted Result.

HOW COULD IT BE THAT we start taxing luxury items like yachts, private jets, jewels, and furs

BUT ... we don't see a substantial increase in government revenues, or people other than rich people are affected by this new tax.

Well, there wouldn't be a substantial increase in government revenues if the tax made the rich people stop buying luxury items.

And I guess it could affect people other than rich people if the all the employees of luxury item stores got laid off as business dried up.

i.e., if rich people stop buying luxury cars, then maybe the middle class employees who service BMW's and Infinity's will also suffer.

Goal

Look for an answer that gives us a way to contradict either of the predictions: - there is NOT a substantial increase in tax revenue (rich ppl don't buy the items as much, or they evade paying the tax somehow)

- NON-rich people are also affected by the tax

11.

The answer to which one of the following questions would be the most relevant in evaluating the accuracy of the government officials’ prediction?

Will luxury goods be taxed
Out of Scope Comparison
It doesn't make any difference whether the raised luxury item tax rate is higher than / equal to / less than the current essential goods tax rate. None of those possibilities lead to us saying "rich people won't buy luxury items anymore" or "non-rich people will be affected".
6% picked this
Will the revenues generated by
Out of Scope Comparison
It doesn't make any difference whether the luxury item tax revenue ends up higher than / equal to / less than the current tax revenue we get from essential goods. All we care about is whether it's a substantial increase.
27% picked this
Correct
Will sales of the luxury
Why this is right
Wow, this is a poorly written correct answer. The problem with it is that it's phrased as "Same vs. Different", and Different could work in favor of the prediction or against the prediction. This is getting at our potential concern that the higher tax may decrease the rate of buying these luxury items, and so we might not get a substantial increase in tax revenue. I guess they're pairing up this binary of "same vs. different" with our common sense: If luxury items continue to sell at the same rate, that would Strengthen the likelihood of the prediction coming true. If luxury items don't continue to sell at the current rate, they'd either be selling at a higher rate than before, or lower. But there's no common sense world in which "raising a tax on the luxury goods leads to a higher rate of them being purchased". So if they're not selling at the current rate, they'd be selling at a lower rate. And if they sell at a lower rate, then it calls into question whether the government would really get a substantial increase in tax revenue. Ultimately, it's just the only answer that allows us to have any weakening effect, but it's a pretty weak objection we're making.
Skill tested: Evaluate · how this choice captures the argument's function is the move to repeat next time.
56% picked this
Will the proposed tax on
Out of Scope: lower class approval
Whether lower income people are happy or not with the government for adding this tax has nothing to do with the likelihood of the tax raising revenue.
10% picked this
Will purchases of luxury items
Out of Scope Comparison
It doesn't make any difference to this prediction whether more of the revenue increase comes from individuals than from corporations (or vice versa).
1% picked this

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