PrepTest 147 - Section 3 - Passage 4 - Question 25

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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

25.

Which one of the following ██ █ ██████████ ███ █████ ███████ █ ██████ ███ ████ ███████ █ ████ ███ ████████

that exempting a █████████ ██████ ███████ █ ████ ███ ██ █████ ██████████

Passage B addresses the issue of a tax threshold.

16%

that flat tax █████████ ███ ███ █████████ ██ ███ ████ █████

Passage A doesn’t argue that flat taxes are not practical.

that higher taxes ██ ███████████ ███████ ███████ ██████████ ███ ████████ ██████

Passage A doesn’t argue that higher taxes on high-income earners inhibit growth.

that a flat ███ █████████ █████████████ ███ ██████████ ███ ███████████ ███████ ██ █████ ███

Passage A argues for this. A flat tax can reduce the complexity of a tax system, which in turn can reduce incentives for people to avoid taxes. Passage B doesn’t address the issue of tax avoidance.

66%

that a progressive ███ ██ ██████ ██ █████████ ███ ███ ██ ██████ ████

Passage A doesn’t argue that a progressive tax is unfair. Also, Passage B addresses this issue.

PrepTest 147 - Section 3 - Passage 4 - Question 25

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