tax system

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jainrahul1985: Master | Next Rank: 500 Posts; Posts: 228; Joined: Sun Aug 17, 2008 8:08 am; Thanked: 4 times

by jainrahul1985 » Sat Oct 09, 2010 5:31 am

Which of the following, if true, is the most logical completion of the argument below?
The tax system of the Republic of Grootland encourages borrowing by granting its taxpayers tax relief for interest paid on loans. The system also discourages saving by taxing any interest earned on savings. Nevertheless, it is clear that Grootland's tax system does not consistently favor borrowing over saving, for if it did, there would be no______
(A) tax relief in Grootland for those portions of a taxpayer's income, if any, that are set aside to increase that taxpayer's total savings
(B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans
(C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts
(D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts
(E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts

OA [spoiler]A but I was confused b/w A and E also I didn't understand the language of these options . Please explain in detail[/spoiler]

Source: Beat The GMAT — Critical Reasoning | Sat Oct 09, 2010 5:31 am

shovan85: Community Manager; Posts: 991; Joined: Thu Sep 23, 2010 6:19 amFollowed by: 24 members; Location: Bangalore, India; Thanked: 146 times

by shovan85 » Sat Oct 09, 2010 5:58 am

The logical completion of the argument would be something that supports savings or something thats agianst borrowing.

We need to search for the option which says Grootland's tax system supports savings and so the system does not consistently favor borrowing over saving but in a negative manner as it starts with there would be NO.....

Now see the options:
A tax relief in Grootland for those portions of a taxpayer's income, if any, that are set aside to increase that taxpayer's total savings
B supports loans or we can say favors Borrowing
C tax relief,unpaid balance in credit card accounts: again favors Borrowing
D Tax due on gifts: Feels like out of context
E tax due, interest-bearing savings accounts: We need tax relief on this to make logical completion

IMO A

GMATGuruNY: GMAT Instructor; Posts: 15539; Joined: Tue May 25, 2010 12:04 pmFollowed by: 1906 members; Location: New York, NY; Thanked: 13060 times; GMAT Score:790

by GMATGuruNY » Sat Oct 09, 2010 8:09 am

jainrahul1985 wrote:Which of the following, if true, is the most logical completion of the argument below?
The tax system of the Republic of Grootland encourages borrowing by granting its taxpayers tax relief for interest paid on loans. The system also discourages saving by taxing any interest earned on savings. Nevertheless, it is clear that Grootland's tax system does not consistently favor borrowing over saving, for if it did, there would be no______
(A) tax relief in Grootland for those portions of a taxpayer's income, if any, that are set aside to increase that taxpayer's total savings
(B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans
(C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts
(D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts
(E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts

OA [spoiler]A but I was confused b/w A and E also I didn't understand the language of these options . Please explain in detail[/spoiler]

The argument states that it is clear that Grootland's tax system does not consistently favor borrowing over saving, for if it did, there would be no______. In order to better understand what's being asked, let's reverse the negative language:

It is clear that Grooland's tax system consistently favors saving over borrowing because it includes_______:

So the correct answer will show that the tax system favors saving.

Only answer choice A works: the system provides tax relief...for income set aside to increase a taxpayer's savings.

Answer choice E does the opposite of what we need: it says that taxes are due on savings (meaning that taxes are owed). Such taxes would discourage, not favor, savings.

The correct answer is A.

Hope this helps!

Last edited by GMATGuruNY on Sat Oct 09, 2010 8:11 am, edited 1 time in total.

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Testluv: GMAT Instructor; Posts: 1302; Joined: Mon Oct 19, 2009 2:13 pmFollowed by: 164 members; Location: Toronto; Thanked: 539 times; GMAT Score:800

by Testluv » Sat Oct 09, 2010 8:11 am

shovan85 wrote:The logical completion of the argument would be something that supports savings or something thats agianst borrowing.

We need to search for the option which says Grootland's tax system supports savings and so the system does not consistently favor borrowing over saving but in a negative manner as it starts with there would be NO.....

This is great reasoning, and great technique!

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abhi.genx7: Senior | Next Rank: 100 Posts; Posts: 85; Joined: Sat Jan 30, 2010 3:49 am; Location: Hyderbad, India; GMAT Score:660

by abhi.genx7 » Tue Oct 12, 2010 2:37 am

Insightful explanation

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