#27- Specific Reference, Must Be True, Expansion

[Administrator]

Complete Question Explanation

(See the complete passage discussion here: lsat/viewtopic.php?t=14276)

SR, Must—Expansion. The correct answer choice is (B)

This question asks for the most reasonable response that the second author would have in response to
the last argument presented by the first author.

In the first passage, the author points out that among enlightened countries, it is argued that fairness
demands that high-income earners pay a bigger share of their income; critics argue that flat taxes rule
out this possibility, and that under flat taxes the wealthy would be taxed less than under progressive
systems. The author asserts that this is not the case—that most tax codes are so complex that they
allow avoidance of taxes among the wealthy. As such, the author asserts, high-income earners usually
end up paying the same under flat tax regimes as under other tax codes. In other words, according to
the first author, progressive tax regimes give high-income earners the ability to avoid taxes.

The correct answer choice will provide a reasonable response to this point from the second author.

Answer choice (A): This point is irrelevant; any tax code would leave open the possibility of
underreporting income, so this does not address the last argument in the first passage.

Answer choice (B): This is the correct answer choice. The first author asserts that it is harder
to avoid taxes in a flat tax system than in a progressive system. If, as this choice provides, the
referenced ability to avoid taxes comes from loopholes rather than from progressive tax systems,
then the first author’s argument applies not necessarily to progressive tax systems, but rather to
systems with loopholes and special deductions.

Answer choice (C): People at all incomes can avoid taxes, but the last final argument in the first
passage deals specifically with high-income earners, and the second author is a proponent of taxing
high-income earners more, so this choice would not be a likely response from the second author.

Answer choice (D): It is probably true that most people would prefer to be able to avoid taxes, but
that is not relevant to either author’s argument and would not make a likely response from the second
author.

Answer choice (E): Neither author mentions or alludes to consumption tax, so this would not be a
likely response, and this cannot be the correct response.

[mpoulson]

Hello,

I wanted to determine why B was the most reasonable and not A or C. Both of these answers seem reasonable. Please explain what is wrong with A and C and why B is the best. Thank you.

V/r,

Micah

[Stephanie Oswalt]

Hi mpoulson,

Thanks for your question. Generally speaking, we need a bit more input from you before we delve into a discussion of a particular RC question. Ultimately, it won't be us who are taking the test; it's you! Our goal is to help you cultivate the analytical ability to approach these questions on your own, which is why you need to help us help you first.

Here's what I'd like you to do:

• 1. Describe your approach to the question.
  
  2. What exactly made the answer choices you have listed particularly attractive?

Thanks,

Stephanie

[mpoulson]

Hey,

I thought the final argument of passage A was saying that rich people have more ways to avoid taxes during graduated tax schemes and thus another reason why we should employ the flat tax. For question 27, the reader is asked to find a valid counter to this from the author's B perspective. I thought C was a strong candidate because it argues that people of all economic levels take steps to avoid taxes. If this is true then maybe this would be possible under the flax tax or maybe not which isn't a good thing for the author of passage A. I thought A was a strong candidate because it argues that the flax tax would offer ways for people to avoid taxes as well. If this is true then maybe the flax tax isn't as effective as claimed. Nevertheless, these were both wrong. Instead the answer was B which say that tax avoidance is possible because loopholes exist and not graduated taxes. I wanted to determine why this was the best answer and not the other two. Hopefully, you can now provide a detailed response.

- Micah

[Emily Haney-Caron]

Hi Micah,

Thanks for explaining your reasoning here; it really helps us to better answer your question! I agree with you that A is a pretty tempting answer choice; when I first read this question, I narrowed it down to A and B before going back to the passage to identify which was the correct answer. The argument the author of Passage A is making in those lines is that the very nature of graduated schemes (their complexity) are what creates the opportunity for high-income earners to avoid taxes. Even if A is true, the author of Passage A could just come back with, "Ok, maybe a few people will do it under a flat scheme, but way more people will do it under a graduated scheme because the schemes have to be so complex! There's no way around it!" Answer C is actually irrelevant to the argument the author is making; he would say, "So what if lots of people try to avoid taxes? The people who have the most incentive, and who do it the most, are rich people. And my argument is still true that it is more of a problem under graduated tax schemes because they have to be so complex!"

B avoids those counter-arguments and instead undermines the argument by making it clear you could have a graduated system that didn't lead to cheating, by removing the loopholes. B shows that it isn't an inherent part of those systems, as Passage A's argument suggests.

[dbpk]

Hi,

I eliminated B because I thought "loopholes and special deductions" could fall under the "complexity of the codes" as mentioned in Passage A, which would not weaken author A's argument but rather provide support for the idea that incentives for the wealthy to avoid taxes are high due to complexity of the tax codes.
How can we know loopholes and special deductions cannot be categorized as part of the complexity of codes and how can I avoid making false connections in the future?
Thank you!

[AthenaDalton]

Hi dbpk,

Great question! I think it is fair to say that a "complex" tax code could refer to loopholes and exemptions, as you suggest.

The author of Passage A is saying that the incentives to avoid paying tax in a graduated system are enormous because high-earners owe increasingly large amounts of taxes as their income increases. This would be less of a concern in a flat-tax system, where all income is taxed at a fixed amount. Passage A concludes by saying that, as the marginal tax rate increases, the incentive to avoid paying tax increases as well, which motivates wealthy taxpayers to avoid paying tax. Passage A is arguing that if a flat tax were imposed, wealthy taxpayers wouldn't have the same incentives to avoid paying tax that they do in graduated systems.

Passage B could point out that the reason wealthy taxpayers pay less in tax is not because they are highly motivated to avoid paying tax at the highest marginal rate, but because exemptions and loopholes make it easy for them to avoid paying tax.

Essentially, if the underlying problem of tax-dodging could be solved by closing the loopholes and exemptions in existing tax codes, why would it be necessary to then take the additional step of imposing a flat tax?

I hope this helps clarify things. Good luck studying!

[snowy]

Hi there! I have a very similar question to dbpk's - Athena's response helped clarify it a little bit, but I'm still confused. Since Passage A says that the tax avoiding opportunities "arise from the very complexity of the codes," I understood that as the author attributing the blame on the complexity of graduated tax codes, not the graduated systems themselves/inherently. As a result, answer choice B wouldn't address Author A's point because Author A wasn't saying that it is because they are graduated. I would really appreciate any clarification about where my understanding went wrong!

(I chose answer choice A because it undermines the way Author A attributes tax avoidance specifically to graduated systems, but I think I do understand the explanation above that Author A could turn around and say, "Yeah sure but it will occur to a way lower extent under flat systems!")

[James Finch]

Hi Snowy,

This question really comes down to what is meant by "complexity:" if it only means that there are lots of exceptions/deductions, then you would be correct and answer choice (B) wouldn't address passage A's stated cause for tax avoidance. However, just creating differing tax brackets, as opposed to a uniform single tax bracket, is another valid reading of what is meant by "complexity." Even having the different brackets paying different rates means a system is more complex than one that only ever sees a single rate paid.

If read in this manner, (B) would be a response to passage A's seeming argument that merely creating a graduated tax system creates opportunities for tax avoidance. If all "complexity" means is different tax rates, that doesn't create any more opportunity to avoid tax than one single rate. Instead, these opportunities would come from some other source (politically influential individuals or lobbyists) rather than a progressive tax system itself. After all, there is nothing saying that a flat-tax system couldn't have specific deductions and exemptions either.

That said, this is a question best answered by process-of-elimination. Do any of the other answer choices make sense? (A) isn't an issue that is brought up in either passage, and wouldn't seem to apply specifically to either progressive or flat tax systems, since there would always be an incentive to lie about how much a person earned (unless the tax rate was 0%). Moreover, passage A is arguing that a flat tax eliminates legal deductions and exemptions that arise out of the complexity of the tax code, not illegal ones like simply misstating one's income.

Hope this clears things up!

[snowy]

This does make a lot more sense now; thank you, James!!