PrepTest 147 - Section 3 - Passage 4 - Question 26

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Passage A.

Intro to Topic · Flat Tax

E.g., you earn $100; the flat tax rate is 26%; you pay $26 dollars in tax; you take home $74.

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Conclusion · Flat tax works pretty well

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Critics · Flat tax may work but is unfair

A more fair system is "progressive" which requires high-income earners to pay a bigger share.

Author's Rebuttal · Flat tax + threshold can be fair

E.g., say the threshold for exemption is $20; you earn $20; you pay $0 in tax; but say you earn $120; your first $20 is exempt from tax; the next $100 is taxed at 26%; so you pay $26 in taxes; you take home $94.

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Author's Rebuttal · Flat tax brings in similar amounts from high earners

"Progressive" tax systems are complex resulting in high earners finding various ways to avoid tax. A flat tax system combined with an exempt amount threshold can deliver similar tax results and is much simpler.

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Progressive Tax is Misunderstood · Tax rate is the same on each layer of income

E.g. everyone pays the same low rate on the first, say, $100 of income; then everyone pays the same higher rate on the next, say, $100 of income; then everyone pays the same even higher rate on the next $100 of income. If you only make $100, you only pay the first low rate. If you make $300, then you split your $300 into three layers. You'll pay the first low rate on the first $100 layer; the next higher rate on the next $100; the next even higher rate on the final $100.

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Premise · Lower layers of income are more important

Because lower layers of income go to pay for essentials.

Passage Style

26.

The authors of the two ████████ █████ ██ ████ ██████ ██ ████████ ████ ███████

Question Type

Author’s perspective

Implied

The correct answer will be a point of disagreement. If you’re using the Split Approach, eliminate any answers that Passage A doesn’t have an opinion about. Then, after Passage B, eliminate any remaining answers that Passage either doesn’t have an opinion about or shares the same opinion as Passage A.

a flat tax ██████ ███ ██ ███████████

If anything, both Passage A and Passage B agree that a flat tax system can be progressive using various tax thresholds.

18%

high-income earners would ███ ████ █████ █ ████ ███ ██████ ████ █████ █ █████████ ███████████ ██████

Passage A thinks high-income earners would pay about the same amount under a flat tax system. Passage B thinks they would pay less under a flat tax system.

45%

flat tax systems ███ ████ ██ ██████ ███ ██████ ██ ███ ████ ████████

There’s no disagreement over whether flat taxes can be put into practice. The issue is whether they’re fair or better than progressive taxes, not the feasibility of implementing them.

14%

graduated progressive systems ████ █████████████ █████████ ███ █ ██████ ████ ██ █████ ██████ ████████

Passage A doesn’t discuss whether high-income taxpayers have to pay a higher rate on their entire earnings under a progressive system. Although Passage A does comment on the idea that progressive systems require high-income earners to “forfeit a bigger share of the incomes,” this is a different issue from whether those earners have to pay a higher tax rate on their entire earnings as opposed to just a portion of their income above a specified amount.

16%

all of an ████████████ ██████ ██████ ██ ███████ ██ ████████

This isn’t a point of disagreement. Passage A acknowledges that a threshold might be appropriate, under which income wouldn’t be taxed. Passage B doesn’t disagree with this.

PrepTest 147 - Section 3 - Passage 4 - Question 26

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