Economist: Currently, many countries rely primarily on taxing income to fund government expenditures. But taxing income does nothing to promote savings and investment. Taxing consumption, on the other hand, would encourage savings. The most important challenge facing these countries is improving their economies, and the only way to accomplish this is to increase their savings rates. Hence, _______.
Summary
Many countries primarily rely on taxing income to support government spending. Taxing income does not promote savings and investment. In contrast, taxing consumption would encourage saving. In these countries, the biggest challenge is improving their economies. The only way to accomplish this is to increase savings rates.
Strongly Supported Conclusions
Hence, many countries should primarily tax consumption as opposed to income.
A
most governments should stop taxing savings and investment
This answer is unsupported. To say that most governments should take action is too strong. The stimulus is limited to “many” countries, not most countries.
B
the economies of countries will rapidly improve if their governments adopt tax policies that encourage savings and investment
This answer is unsupported. We don’t know from the stimulus whether these countries’ economies would improve rapidly. It could be the case that they improve slowly, or gradually.
C
in most countries taxes on consumption alone could raise adequate revenues to fund government expenditures
This answer is unsupported. To say that most countries could achieve this is too strong. The stimulus is limited to “many” countries, not most countries.
D
the tax laws of many countries should be revised to focus on taxing consumption rather than income
This answer is strongly supported. We know from the stimulus that taxing consumption encourages savings. Therefore, this would be a better strategy for improving savings rates than taxing income.
E
it is detrimental to the economic improvement of any country to continue to tax income
This answer is unsupported. To say that this is detrimental to any country is too strong. The stimulus is limited to “many” countries, not any country.