Hi,
I've checked the previous explanations given for this question; still not convinced why D is not a correct option|
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 resultunless which of the following were true?
Official Answer -
(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.
I understand that C is a correct option; but why is D no correct?
(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 for evaders are raised at the same time.
The way I see it.. the correct answer is one which, if FALSE, would break the vicious cycle.
So FALSE of D is that "Even if there are no penalties, a lowering of taxes will cause frequent tax evaders to pay tax" .. wont this break the vicious cycle??
Current cycle given Evasion --> Higher tax --> More financial pressure --> More Evasion
If D were NOT true then Evasion --> will not force to increase tax; so this would break the cycle
Where am I going wrong with this one?
I've checked the previous explanations given for this question; still not convinced why D is not a correct option|
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 resultunless which of the following were true?
Official Answer -
(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.
I understand that C is a correct option; but why is D no correct?
(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 for evaders are raised at the same time.
The way I see it.. the correct answer is one which, if FALSE, would break the vicious cycle.
So FALSE of D is that "Even if there are no penalties, a lowering of taxes will cause frequent tax evaders to pay tax" .. wont this break the vicious cycle??
Current cycle given Evasion --> Higher tax --> More financial pressure --> More Evasion
If D were NOT true then Evasion --> will not force to increase tax; so this would break the cycle
Where am I going wrong with this one?
further, do you think that the approach of negating.the choice is the best option here to.check the validity of answer choice?
