The stimulus tells us that some policymakers think that in order for their country to keep growing economically, people need to have more money in their personal savings accounts. A new legislative measure proposes to allow people to set up savings accounts where they don't pay any taxes on the interest until they take their money out of the account. Even though the government will lose some tax revenue, supporters say it'll pay off. However, the economist doesn't believe that this strategy will work because similar measures have been attempted before. And, when these measures were attempted, people didn't have any more money in their personal savings; they just diverted money from other personal savings, resulting in no change in personal savings.
The question says, "The author criticizes the proposed tax incentive program by..."
We see that the author attacks the policymakers' proposed tax incentive program by calling into question their support. These policymakers believe that their proposal will help the economy by ultimately providing more money for banks to loan. However, the author cites past programs as evidence that the overall levels of personal savings was unchanged, which suggests that banks didn't have more money to lend. Thus, the author is attacking a premise of the policymakers' argument.
Note that this is EXTREMELY RARE on the LSAT. There are hardly any questions that have to do with attacking a premise. However, this is one of the very, very few that do. As long as you're focused on analyzing the argument at face value, you'll be able to see what's going on in it clearly.
(A) says, "challenging a premise on which the proposal is based"
This is exactly what we had anticipated. The premise of the policymakers' argument is that their proposal will lead to an increase in personal savings, with only a small reduction in overall tax revenue. The author (the economist) cites past examples of similar measures in which personal savings didn't increase, thereby attacking the policymakers' premise. This is the correct answer.
Does this make sense? Let us know if you have any questions!
