PT116.S3.Q15 > Question

SECTION 1 · rc

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SECTION 3 · lr

SECTION 4 · rc

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A province reduced its income tax rate for most taxpayer over a two-year period, so why did it bring in more money from income taxes in those years?

This is an except question: the four incorrect answers will somehow be helpful in explaining why the province collected more money from income taxes. Perhaps the taxpayers began earning higher incomes during this period, or maybe the number of taxpayers increased. The correct answer, however, will either be irrelevant or make the discrepancy even harder to resolve.

If the economy was prosperous, then people presumably earned more money, meaning that they could have paid more in taxes despite the lower tax rate.

This tells us that the province applied its personal income tax more broadly, which could explain how it collected more money with a lower tax rate: the rate was applied to more income.

The stimulus only tells us that the tax rate was reduced for most taxpayers. If the tax rate was increased for the highest earners, then that could explain how more money was collected during that period.

This is both redundant and irrelevant. We already know that personal income tax revenue increased, and other taxes are irrelevant to explaining the increased income tax revenue. So this isn't helpful to resolve the discrepancy.

More people living in the province would likely mean more people paying taxes, which could explain why revenues increased under a lower tax rate.

PrepTest 116 - Section 3 - Question 15

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