Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue because the admittedly heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship. In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax.
The information given, if true, most strongly supports which of the following?
(A) The market for luxury boats would have collapsed even if the new tax on luxury boats had been lower.
(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.
(C) Because many people never buy luxury items, imposing a sales tax on luxury items is the kind of legislative action that does not cost incumbent legislators much popular support.
(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.
(E) Taxes can be equitable only if their burden is evenly distributed over the entire population.
OA: B
Hello, Experts. Please explain, why is D incorrect?
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lionsshare
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We know that there was a tax increase on luxury boats that was only supposed to impact the wealthy. We know that 20% of the workers employed by luxury boat manufacturers were laid off. We have to determine what is true based on this.lionsshare wrote:Proponents of the recently introduced tax on sales of new luxury boats had argued that a tax of this sort would be an equitable way to increase government revenue because the admittedly heavy tax burden would fall only on wealthy people and neither they nor anyone else would suffer any economic hardship. In fact, however, 20 percent of the workers employed by manufacturers of luxury boats have lost their jobs as a direct result of this tax.
The information given, if true, most strongly supports which of the following?
(A) The market for luxury boats would have collapsed even if the new tax on luxury boats had been lower.
(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.
(C) Because many people never buy luxury items, imposing a sales tax on luxury items is the kind of legislative action that does not cost incumbent legislators much popular support.
(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.
(E) Taxes can be equitable only if their burden is evenly distributed over the entire population.
OA: B
Hello, Experts. Please explain, why is D incorrect?
B is undoubtedly true. If the increased revenue generated by the tax isn't greater than the lost revenue caused by the loss of jobs, the net effect on revenue will not be positive for the government.
D is wrong because 1) we don't actually know for certain who was buying the luxury boats and 2) it's assumed that wealthy people were buying the boats. There's no reason to believe that the people buying luxury boats were not wealthy.
