CR- incoming tax structure

Expert replies

zoe: Master | Next Rank: 500 Posts; Posts: 121; Joined: Mon Apr 04, 2016 6:31 pm; Thanked: 1 times

by zoe » Wed Jun 08, 2016 4:47 am

Dear friends,
please help clarify the D and E, I can understand A is correct,

Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

for D, if stop lending money, then more money available , seems good
for E, if all taxpayers can get same tax saving, it means unfair for all taxpayers, then rebut the availability of the plan.

please clarify my faults.

thanks a lot

have a nice day

Source: Beat The GMAT — Critical Reasoning | Wed Jun 08, 2016 4:47 am

DavidG@VeritasPrep: Legendary Member; Posts: 2663; Joined: Wed Jan 14, 2015 8:25 amFollowed by: 128 members; Location: Boston, MA; Thanked: 1153 times; GMAT Score:770

by DavidG@VeritasPrep » Wed Jun 08, 2016 8:35 am

zoe wrote:Dear friends,
please help clarify the D and E, I can understand A is correct,

Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

for D, if stop lending money, then more money available , seems good
for E, if all taxpayers can get same tax saving, it means unfair for all taxpayers, then rebut the availability of the plan.

please clarify my faults.

thanks a lot

have a nice day

Remember: the goal of the plan is to make more money available for business loans. D would have no impact on how much $ lenders had available to loan to businesses in general, it merely specifies that lenders would prefer to lend to businesses that can pay them back, rather than businesses that can't. This would be the case irrespective of the tax plan.

E is irrelevant. We don't care about whether this plan is fair, or how the tax breaks are allocated among people of different income levels. We care about whether it will spur people to save more, thus increasing the pool of available lending funds. E sheds no light on this.

Veritas Prep | GMAT Instructor

Veritas Prep Reviews
Save $100 off any live Veritas Prep GMAT Course

OptimusPrep: Master | Next Rank: 500 Posts; Posts: 410; Joined: Fri Mar 13, 2015 3:36 amFollowed by: 8 members; Location: Worldwide; Thanked: 120 times; GMAT Score:770

by OptimusPrep » Wed Jun 08, 2016 8:04 pm

zoe wrote:Dear friends,
please help clarify the D and E, I can understand A is correct,

Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

for D, if stop lending money, then more money available , seems good
for E, if all taxpayers can get same tax saving, it means unfair for all taxpayers, then rebut the availability of the plan.

please clarify my faults.

thanks a lot

have a nice day

While solving a CR question, it is very easy to forget the main point as to why we are solving this particular question.
Therefore it is always good to read the question stem first and then the passage.

Here we need to weaken the conclusion that more money would be available for the business after the modification of tax structure.

Only Option A does that by saying that the individuals will also start borrowing more, hence no money will be left for the businesses.

Option B is irrelevant

Option C: even if some do not increase the savings, some others will. Hence this does not weaken our conclusion

Option D: This would have been the case always. Obviously bankers would put a criteria before lending out. This criteria would not be affected by the modification of tax structure.

Option E: This again does not talk about the availability of the loan for the businesses. Irrelevant

Correct Option: A

GMAT Course Reviews

563 reviews

1168 reviews

431 reviews

359 reviews

147 reviews

5/5

5 Star (563 Reviews)

"Target Test Prep is the closest to the official version of the GMAT exam, about 99% accuracy in terms of the quality and quantity of information. The course has excellently created singular sets of focused lessons and tests for every possible topic that one could come across in the official GMAT exam."

"The TTP course maximizes the efficiency of the time you spend studying. It will take time and effort but I could almost guarantee that if you complete the course exactly as it is laid out you will get an amazing score. They also have a very responsive team willing to help with any questions you might have."

"TTP has two things that I think no other test prep company offers: A teaching approach that reinforces understanding and an attitude that will give you the mental preparedness needed to succeed on the test. TTP gives you a deep understanding of the concept you need to know while teaching you how to think."

Write a Review