Many economists hold that keeping taxes low helps to spur economic growth, and that low taxes thus lead to greater...
GMAT Critical Reasoning : (CR) Questions
Many economists hold that keeping taxes low helps to spur economic growth, and that low taxes thus lead to greater national prosperity. But Country X, which has unusually high taxes, has greater per-capita income than the neighboring Country Y, which has much lower taxes. Some politicians have concluded from this that high taxes do not hinder national prosperity.
The politicians' reasoning is most vulnerable to criticism on which of the following grounds?
Passage Analysis:
| Text from Passage | Analysis |
|---|---|
| Many economists hold that keeping taxes low helps to spur economic growth, and that low taxes thus lead to greater national prosperity. |
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| But Country X, which has unusually high taxes, has greater per-capita income than the neighboring Country Y, which has much lower taxes. |
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| Some politicians have concluded from this that high taxes do not hinder national prosperity. |
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Argument Flow:
The passage starts with a standard economic theory, then presents one contradictory example, and finally shows how politicians jump to a sweeping conclusion based on just that one case
Main Conclusion:
Politicians conclude that high taxes do not hinder national prosperity
Logical Structure:
The politicians are making a hasty generalization - they're taking one example (Country X vs Y) and using it to completely reject a general economic principle. This is weak because one counterexample doesn't disprove a general rule, and there could be many other factors explaining why Country X is more prosperous despite higher taxes
Prethinking:
Question type:
Misc - This is asking us to identify the flaw in the politicians' reasoning. We need to find what makes their logic vulnerable to criticism.
Precision of Claims
The politicians make a broad, absolute claim that 'high taxes do not hinder national prosperity' based on a single comparison between two neighboring countries.
Strategy
Since this is about finding flaws in reasoning, we need to identify logical errors the politicians are making. The politicians saw that Country X (high taxes) has higher per-capita income than Country Y (low taxes) and concluded that high taxes don't hurt prosperity. We should look for classic reasoning errors like: drawing broad conclusions from limited evidence, ignoring other factors that could explain the difference, or assuming correlation implies causation.
This focuses on what might happen if Country X reduced its taxes in the future, but that's not the flaw in the politicians' current reasoning. The politicians aren't making predictions about tax reduction - they're drawing conclusions from the current situation. This doesn't address the core problem with their logic.
This suggests the politicians are confusing 'not hindering' with 'promoting' prosperity. However, the politicians only conclude that high taxes 'do not hinder' prosperity - they're not claiming that high taxes actually promote it. So this isn't the flaw we're looking for.
This is correct. The politicians see that Country X (high taxes) is more prosperous than Country Y (low taxes) and conclude that high taxes don't hurt prosperity. But they completely ignore that these countries might differ in many other crucial ways - natural resources, education systems, geographic advantages, political stability, industrial development, etc. Any of these factors could explain why Country X is more prosperous despite higher taxes. This is a classic flaw of assuming that one factor (taxes) is the only relevant variable.
While it's true that per-capita income and economic growth rate are different measures, this isn't the main flaw in the politicians' reasoning. They're trying to evaluate the impact of taxes on national prosperity, and per-capita income is actually a reasonable measure of prosperity for this purpose.
This gets the politicians' position backwards. The politicians aren't assuming the economists are correct - they're actually using the Country X vs. Y example to argue against the economists' thesis. They think they've found evidence that contradicts the economists' view, so this choice mischaracterizes their reasoning.