I'm always on the lookout for math mistakes on TV and the radio. I hear them frequently on CNBC, Fox Business News, Bloomberg, etc. But now even the Wall Street Journal has let me down. Is nothing sacred?! A friend just brought this to my attention re: the cost of a Maybach.
The article states that the car sells for $459,000 in the U.S. but sells for $1,000,000 in Hong Kong because "the biggest reason for its high price is the Hong Kong luxury tax, about 50%". But if a $459,000 price is jacked up to $1,000,000, the tax alone is $541,000, over 100% of the original price.
Amy Ma, the author of the article fell into one of the classic traps that an SAT Math Tutor in NYC would avoid: thinking that percents operate the same way in both directions. In round numbers, the price of the Maybach is $500,000 in the U.S. and $1,000,000 in Hong Kong. Yes, 50% of the after tax price is tax, but the SAT trap is to say the tax is $500,000 out of $1,000,000 = 50%. When calculating percents, always bear in mind the starting point of the calculation. A 50% tax implies a 50% tax on the starting (i.e., pre-tax) price. A 50% tax on a $500,000 car is $250,000, yielding an after tax price of $750,000.
According to Hong Kong Regulations, a $459,000 car should actually be $744,150 in Hong Kong after a tax of about 62%. Since the 62% "registration tax" is much greater than the 50% luxury tax mentioned in the article, the 50% tax can't be the biggest reason (as the author claims) for the big price tag.
At best, the author hasn't clearly explained how the price continues to rise from about $750,000 to about $1,000,000. But if the car actually does cost $1,000,000 in Hong Kong, the good news for Hong Kong residents is that moving to the U.S. gives them a 50% discount on the car.
Click here for top NYC math specialists who don't fall into SAT traps.
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