Critical Reasoning

When people evade income taxes by not declaring taxable income, a vicious cycle results. Tax evasion forces lawmakers to raise income tax rates, which causes the tax burden on nonevading taxpayers to become heavier. This, in turn, encourages even more taxpayers to evade income taxes by hiding taxable income. The vicious cycle described above could not result unless which of the following were true?

(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes.
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost through evasion, bring in more than they cost, but their success rate varies from year to year.
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue, they do not allow adequately for revenue that will be lost through evasion.
(D) No one who routinely hides some taxable income can be induced by a lowering of tax rates to stop hiding such income unless fines of evaders are raised at the same time.
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes.

What type of CR is this? Is this assumption?

I think it is an assumption CR. The way the passage seems to be structured is through a causal theme as the passage states that tax evasion causes lawmakers to increase taxes which causes taxpayers to evade income taxes by hiding taxable income.

I believe the answer is E as this cycle can only result if more tax payers try to hide taxable income. E shows that tax payers do not differ from each other and increases in tax rates will cause them to evade taxes.

patanjali.purpose wrote:When people evade income taxes by not declaring taxable income, a vicious cycle results. Tax evasion forces lawmakers to raise income tax rates, which causes the tax burden on nonevading taxpayers to become heavier. This, in turn, encourages even more taxpayers to evade income taxes by hiding taxable income. The vicious cycle described above could not result unless which of the following were true?

(A) An increase in tax rates tends to function as an incentive for taxpayers to try to increase their pretax incomes.
(B) Some methods for detecting tax evaders, and thus recovering some tax revenue lost through evasion, bring in more than they cost, but their success rate varies from year to year.
(C) When lawmakers establish income tax rates in order to generate a certain level of revenue, they do not allow adequately for revenue that will be lost through evasion.
(D) No one who routinely hides some taxable income can be induced by a lowering of tax rates to stop hiding such income unless fines of evaders are raised at the same time.
(E) Taxpayers do not differ from each other with respect to the rate of taxation that will cause them to evade taxes.

What type of CR is this? Is this assumption?

The question asks for WHAT MUST BE TRUE -- in other words, for the ASSUMPTION.

Premises are FACTS. Only one fact is given in the passage: When people evade income taxes.
The rest of the passage offers PREDICTIONS. Predictions are not facts.

The first connection made by the passage involves a language shift.
The premise is about X: People EVADE income taxes.
The conclusion is about Y: Lawmakers WILL RAISE income tax rates.

The passage assumes that X is linked to Y: that if people EVADE income taxes, lawmakers WILL RAISE income tax rates.

What must be true for this connection to be valid?
Answer choice C: IT MUST BE TRUE that when lawmakers establish income tax rates, they do not allow adequately for revenue that will be lost through evasion.
C provides the necessary ASSUMPTION: in order to conclude that the lawmakers will RAISE income tax rates, it must be true that -- when the lawmakers establish the initial rates -- they do not allow adequately for the revenue that will be lost through EVASION.

The correct answer is C.

GMATGuruNY wrote: The question asks for WHAT MUST BE TRUE -- in other words, for the ASSUMPTION.

Premises are FACTS. Only one fact is given in the passage: When people evade income taxes.
The rest of the passage offers PREDICTIONS. Predictions are not facts.

The first connection made by the passage involves a language shift.
The premise is about X: People EVADE income taxes.
The conclusion is about Y: Lawmakers WILL RAISE income tax rates.

The passage assumes that X is linked to Y: that if people EVADE income taxes, lawmakers WILL RAISE income tax rates.

What must be true for this connection to be valid?
Answer choice C: IT MUST BE TRUE that when lawmakers establish income tax rates, they do not allow adequately for revenue that will be lost through evasion.
C provides the necessary ASSUMPTION: in order to conclude that the lawmakers will RAISE income tax rates, it must be true that -- when the lawmakers establish the initial rates -- they do not allow adequately for the revenue that will be lost through EVASION.

The correct answer is C.

And we did NOT pick option D because D would rather tell how we could lower the evasion rate whereas the question is regarding the vicious cycle of evading and raising which is best answered/broken by taking evasion losses into account while planning itself so that the taxes do not have to be raised as raising causes further more evasion & evasion causes more raising & hence the cycle. D doesn't stop the cycle, rather nips in the bud by controlling evasion at first - also, avoiding evasion absolute might be a far fetched dream or too theoretical. So, even if it is small evasion (by deploying controlling methods), the cycle might still occur if loses due to evasion are not taken into account in the beginning
Is my though process up to the mark? Thanks in advance.