QUESTION TYPE: Complete the Argument
CONCLUSION: Those governments should tax consumption.
REASONING: Taxing consumption would improve savings. It’s necessary to improve savings.
ANALYSIS: The author is making a subtle argument. They are not saying that income taxes are always bad. They are saying countries should not primarily use income taxes, especially if those countries are trying to increase savings.
So those countries that rely primarily on income taxes and need to raise savings should tax consumption more and income less.
- The argument never talks about taxes on savings and investment. Maybe governments don’t tax savings. It doesn’t make sense to conclude with this answer unless we know savings are actually being taxed.
- This is too strong. The argument said that improving savings is a necessary condition. So we have no evidence that the author thinks economies would “rapidly improve” with better tax policies.
- The author doesn’t say that governments should use only consumption taxes. There argument is just we should tax consumption more and income less.
- CORRECT. This is an appropriately subtle conclusion. The author said the problem is that countries rely “primarily” on income taxes. The author is not categorical, so it sounds like their main point is that we should have more consumption taxes and less income taxes.
- Too strong. The author said “many countries” rely primarily on income taxes. There may be some countries that could benefit from more income taxes – for instance, those countries that already have high savings and investment rates.
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