ParadoxDiff: Medium
Logic Breakdown
Passage Summary: A province cut its income tax rates two years in a row. Surprisingly, the government didn't lose money; they actually ended up collecting more than before the cuts.
Reasoning: A province lowered its income tax rates in two consecutive years, yet the total tax revenue collected stayed the same the first year and increased significantly the second year.
Analysis: Governments usually love taking credit for tax cuts, but they love the revenue even more. This paradox asks us to explain how a smaller slice of the pie resulted in more pie overall. Since revenue is the product of the tax rate and the taxable income, we need to find four ways the 'taxable income' base grew—perhaps through population booms, higher salaries, or new businesses—and identify the one outlier that doesn't help explain the mystery. The 'Except' answer will likely be irrelevant to the total money collected or might even suggest revenue should have fallen further.
Reasoning: A province lowered its income tax rates in two consecutive years, yet the total tax revenue collected stayed the same the first year and increased significantly the second year.
Analysis: Governments usually love taking credit for tax cuts, but they love the revenue even more. This paradox asks us to explain how a smaller slice of the pie resulted in more pie overall. Since revenue is the product of the tax rate and the taxable income, we need to find four ways the 'taxable income' base grew—perhaps through population booms, higher salaries, or new businesses—and identify the one outlier that doesn't help explain the mystery. The 'Except' answer will likely be irrelevant to the total money collected or might even suggest revenue should have fallen further.
Passage Stimulus
Passage Redacted
Unlock Full Passage15.Each of the following, if true, could help to resolve the apparent discrepancy described above EXCEPT:
Correct Answer
D
Total revenue from all taxes going up (D) doesn’t address personal income tax revenue. Sales, corporate, or property taxes could explain the total, leaving the personal income tax discrepancy unresolved. Hence it’s the EXCEPT.
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