Critical Reasoning

Hi Friends,

I am having difficulty in answering the following question. Please help.

One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction. This tax,therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income,the higher the annual percentage rate at which the income is taxed.

The conclusion above would be properly drawn if which of the following were assumed as a premise?

(A) The amount of money citizens spend on products subject to the state tax tends to be equal across
income levels.

(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.

(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low.

(D) The lower a state's sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society.

(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.

OA after some discussions.

It seems like answer is B

(A) The amount of money citizens spend on products subject to the state tax tends to be equal across
income levels. --> NO. This is not the premise we look for!This is not what argument talks about!

(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes. --> because it is mentioned that "it has the reverse effect of the federal income tax", we can assume this!
(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low. -->Just Vice versa!

(D) The lower a state's sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society. -->This is very spesific. IT is not correct to assume such a thing cos the argument does not talk about redistribution or affluent citizens

(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax. --> This is not mentioned in the argumnet. It is nonsence to assume such a thing!

B for me.

Ozlemg,
your explanation and answer are different. Check it out please.

IMO A...

P1: One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction.
C1: This tax,therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income,the higher the annual percentage rate at which the income is taxed.

Note: The effect of the state tax is "the lower the income,the higher the annual percentage rate at which the income is taxed". This is because the tax is 7 percent for everybody. The argument states that the reverse is true for the federal tax: the lower the income, the lower the annual percentage rate at which the income is taxed.

Questions Stem: The conclusion above would be properly drawn if which of the following were assumed as a premise? (We are looking for an assumption)

(A) "The amount of money citizens spend on products subject to the state tax tends to be equal across income levels." CORRECT. The conclusion is that the state tax has the opposite effect of the federal tax. The effect of the state tax is "the lower the income, the higher the annual percentage rate at which the income is taxed". The argument implies that since the state tax rate is the same for everyone, both the high income person and low income person pay the same amount in state tax, and therefore, the low income person pays a higher rate of state tax relative to income than the high income person. This would only be true if the both the high income person and low income person spend the same amount.

For example, consider two people with incomes of $70,000 and $700,000. If both people spend $10,000 then the amount paid in state tax would be $700. The $700 in taxes would represent a greater percentage of the $70,000 income than the $700,000 ($700 is 1% of $70,000 and 0.1% of $700,000). In this scenario the argument would be true.

Now consider if the two people spend different amounts. Imagine if the person with the $70,000 income spends $10,000 and the person with the $700,000 spends $200,000. Then the state tax for the low income person would be $700 ($10,000 times 7%) and the state tax for the high income person would be $14,000 ($200,000 times 7%). In this case the low income person would pay 1% of his income in state taxes ($700 divided by $70,000) and the high income person would pay 2% of his income in state taxes ($14,000 divided by $700,000). The conclusion that "the lower the income,the higher the annual percentage rate at which the income is taxed" is no longer true.

For the conclusion to be true we must assume that people spend the same amount across different income levels. This is exactly what this answer choice states.

(B) "The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes." INCORRECT. We need a answer that supports the conclusion that the effect of the state tax, "the lower the income, the higher the annual percentage rate at which the income is taxed", is the opposite of the effect of the federal tax. The argument implies that the federal tax favors lower incomes and the state tax favors higher incomes.

This answer is incorrect because it does not support the argument. It contradicts the argument. This answer states that the federal tax favors high incomes and the state tax favors low incomes. This is the opposite of what we need.

(C) "Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low." INCORRECT. The conclusion that we are trying to support deals with the effect of the state tax relative to the effect of the federal tax. What people can afford is irrelevant to the argument.

(D) "The lower a state's sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society." INCORRECT. The conclusion that we are trying to support deals with the effect of the state tax relative to the effect of the federal tax. Similar to answer (C), the "redistribution of income from affluent citizens to the rest of society" is irrelevant to this argument.

(E) "Citizens who fail to earn federally taxable income are also exempt from the state sales tax." INCORRECT. The conclusion that we trying to support is that the effect of the state tax, "the lower the income, the higher the annual percentage rate at which the income is taxed", is the opposite of the effect of the federal tax.

A person who has $0 federally taxable income pays $0 in federal taxes. This answer states that that person would also be exempt from the state tax and therefore pay $0 in state taxes. This person would pay $0 in both federal and state taxes. In other words, the state and federal tax have the same effect on this person. This is not consistent with the conclusion that the state tax has the opposite effect of the federal tax.

Woow...impressed.

yes, A is correct.

A-->This statement makes an assumption regarging the spending habits of the two groups, and if it were true, the statement would be true as well.

but how are we going to make this math reasoing to grab what's going on in the argument, in the real test, i dont know indeed!!!

Dean Jones wrote:Hi Friends,

I am having difficulty in answering the following question. Please help.

One state adds a 7 percent sales tax to the price of most products purchased within its jurisdiction. This tax,therefore, if viewed as tax on income, has the reverse effect of the federal income tax: the lower the income,the higher the annual percentage rate at which the income is taxed.

The conclusion above would be properly drawn if which of the following were assumed as a premise?

(A) The amount of money citizens spend on products subject to the state tax tends to be equal across
income levels.

(B) The federal income tax favors citizens with high incomes, whereas the state sales tax favors citizens with low incomes.

(C) Citizens with low annual incomes can afford to pay a relatively higher percentage of their incomes in state sales tax, since their federal income tax is relatively low.

(D) The lower a state's sales tax, the more it will tend to redistribute income from the more affluent citizens to the rest of society.

(E) Citizens who fail to earn federally taxable income are also exempt from the state sales tax.

OA after some discussions.

Is this LSAT or GMAT question?

IMO: A

Let's assume low income people earn $100/year and spend $10 on products subject to the state tax, their tax rate is 10% in this case.

Let's assume high income people earn $1000/year and spend the same $10 on products subject to the state tax, their tax rate is 1% in this case.

Clearly this comparison shows that the lower the income, the higher the annual percentage rate at which the income is taxed.


Just my $0.02

Not able to follow this one.

Please help.

Thanks.