Question 25

When income tax rates are reduced, there is an increase in taxable income, and an increase in
taxable income results in increased total income tax revenues for the government. Which of the following is analogues to the argument above in terms of its logical features?

Solution

The given situation talks about a benefit getting reaped by a counter-intuitive step. If Govt. wants increased tax revenues then a straightforward suggestion would have been to increase tax rates. Any suggestion to reduce tax rates would be thought of as complete opposite of desired result. But as the situation given in the question explains, it actually helps the Govt. in fulfilling its goal.

Similarly, if a product is to be advertised, it is expected that the prospective customer be told about it in as much detail as possible. But that would backfire as no one bothers reading long ads. So brief ads with less than 25 words which would initially seem too short to advertise the product well turn out to be the best way to market the product. This is analogous to the income tax rate situation of the Govt. Hence, the answer.

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When income tax rates are reduced, there is an increase in taxable income, and an increase intaxable income results in increased total income tax revenues for the government. Which of the following is analogues to the argument above in terms of its logical features?

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When income tax rates are reduced, there is an increase in taxable income, and an increase in
taxable income results in increased total income tax revenues for the government. Which of the following is analogues to the argument above in terms of its logical features?