Raising the tax rate on essential goods a traditional means of increasing government revenues invariably turns low-an...

Mehran December 3, 2013

This question type is very rare. We are looking for the question that would best help us evaluate the argument. The best way to approach these questions is to think of the two extremes for each question. These extremes for the correct answer will strengthen the argument in one extreme but weaken the argument with the other.

Let's first break down the argument. What is the conclusion? The new tax added on purchases of luxury items will result in a substantial increase in government revenues while affecting only the wealthy individuals and corporations who can afford to purchase such items. This proposal is recommended instead of the traditional means of increasing government revenues, i.e. raising the tax rate on essential goods, which invariably turns low-and middle-income taxpayers against the government.

(A) is incorrect because it won't help us evaluate the accuracy of the government officials' prediction. Whether or not luxury goods are to be taxed at a higher rate than that at which essential goods are CURRENTLY taxed will not help us evaluate the politicians' proposal. Remember, we are placing the new tax on luxury items in place of RAISING the tax rate on essential goods. The corresponding tax rate is not relevant because even if the tax rate on luxury goods was lower than the current tax rate on essential goods, it could still generate more revenue because luxury items are more expensive.

(B) is incorrect because it won't help us evaluate the accuracy of the government officials' prediction. We have already been told that the government officials have predicted that this tax on luxury items will result in a substantial increase in government revenue. As such, the information provided by (B) does not help us evaluate the argument because it does not provide us with any new information. Notice that both answers to (B) tend to weaken the officials' claim that this will result in a substantial increase in government revenue.

(C) is CORRECT because it is most relevant in evaluating the accuracy of the government officials' prediction. To evaluate this proposal, we would need to know how the tax on luxury items will affect demand for these luxury items. If, due to the new tax, the people who could afford luxury items can no longer afford the items, or merely decide to no longer buy them, then the tax will not result in a substantial increase in revenues. Thus, it is very important to know the impact of this proposed tax on the sale of luxury items in order to evaluate the accuracy of the government officials' prediction. So imagine that the answer to (C) was yes, this would clearly strengthen the argument, whereas if the answer to (C) was no, this would clearly weaken the argument. As such, (C) is the correct answer.

(D) is incorrect because whether or not the proposed tax wins support for the government in the eyes of low- and middle-income taxpayers has no relevance in evaluating the accuracy of the government officials' prediction.

(E) is incorrect because a comparison of purchases of luxury items by corporations and by wealthy individuals is not relevant in evaluating the accuracy of the government officials' prediction.

Hope that was helpful! Please let us know if you have any other questions.