Critical Reasoning

Which of the following, if true, most logically completes the argument?

Anoca County's public schools are supported primarily by taxes on property. The county plans to eliminate the property tax and support schools with a new three percent sales tax on all retail items sold in the county. Three percent of current retail sales is less than the amount collected through property taxes, but implementation of the plan would not necessarily reduce the amount of money going to Aroca County public schools, because ________.

(A) many Aroca County residents have already left the county because of its high property taxes

(B) a shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County

(C) at least some Aroca County parents are likely to use the money they will save on property taxes to send their children to private schools not funded by the county

(D) a significant proportion of parents of Aroca County public school students do not own their homes and consequently do not pay property taxes

(E) retailers in Aroca County are not likely to absorb the sales tax by reducing the pretax price of their goods

Plan: eliminate property tax, replace with sales tax. Currently, the sales tax creates less revenue than than the property tax, but we're looking for a reason that it won't necessarily reduce school funding. We need something that will show how sales taxes will keep school funding the same (or increase it).

A: nothing to do with revenue changes. These former residents already aren't paying property tax (thus not funding the schools).

B is good. If retail sales increase, the sales tax may bring more revenue to the public schools. Residents of neighboring counties weren't paying property tax in Anoca, so any sales tax they contribute represents an increase.

C: Money spent on private schools is not subject to sales tax, so this will not help make up the shortfall.

D: irrelevant; someone is paying property tax (whoever owns the homes), and that tax money is used for the schools.

E: this does not explain how the sales tax will not reduce school funding

Property tax will be replaced with 3% of sales taxes as the source of school funding. Although 3% of sales taxes is currently the lesser amount, school funding will not necessarily be reduced because _____

The right answer to a fill-in-the-blank must complete the author's train of thought. Here we expect the right answer to provide reason to believe that after the switch to the new funding source, the dollar amount of 3% sales tax might actually increase to match what the city used to collect from the property tax before the switch.

The full solution below is taken from the GMATFix App.



-Patrick

kobel51 wrote:Anoca County's public schools are supported primarily by taxes on property. The county plans to eliminate the property tax and support schools with a new three percent sales tax on all retail items sold in the county. Three percent of current retail sales is less than the amount collected through property taxes, but implementation of the plan would not necessarily reduce the amount of money going to Aroca County public schools, because ________.

Which of the following, if true, most logically completes the argument?

Currently - Schools are supported by Tax on Property.

Proposed - Eliminate Property Tax and support schools with a 3% increase in Sales Tax on Retail Items.

Proposed Tax < Current Tax Collected

However the Proposed Tax won't reduce the amount of money collected for Schools _______________


Here we need to show / reason that the proposed Tax will soon result in an increased amount of Money collected from Sale of Retail Goods.

(A) many Aroca County residents have already left the county because of its high property taxes

Irrelevant.

(B) a shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County

Looks Promising the said action will result in -

Increased Sale of Retail Goods ---- > Increased Sales Tax Collected

Let's keep it for further consideration.

(C) at least some Aroca County parents are likely to use the money they will save on property taxes to send their children to private schools not funded by the county

Out of Scope.

(D) a significant proportion of parents of Aroca County public school students do not own their homes and consequently do not pay property taxes

Out of scope and Irrelevant.

(E) retailers in Aroca County are not likely to absorb the sales tax by reducing the pretax price of their goods

Out of Scope.


Hence IMO (B) looks best...

I have a follow-up question on this one.
Since option B indicates that the sales tax may bring more revenue, option E also does the same though it doesn't say if that extra amount would cover the gap between the revenue from property and revenue from sales tax. Let me explain how option E does so:
E: retailers in the county are not likely to absorb the sales taxes by reducing the pretax price of their goods.
so, if $100 is a good's price (assuming with $5 of profit) and 3% is the tax (the argument says: 3% of current retail sales is less than ... So, 3% of current sales would be $3)
Since retails would NOT absorb the sales tax => they would maintain their profits.
So, the new price would be: cost price + profit + 3% extra of both cost and profit
= 95 + 95 * 3/100 + 5 + 5*3/100 = 95 + 2.85 + 5 + .15 = $103
Therefore, the sales tax on new price would be: 103 * 3/100 = $3.09 instead of $3 as estimated earlier (3% on CURRENT retail sales).
So, in net, option E is also in a way providing more sales tax collection to the tax authorities.
So, please explain which one of the two options: E or B weighs more?

Bill@VeritasPrep wrote:Plan: eliminate property tax, replace with sales tax. Currently, the sales tax creates less revenue than than the property tax, but we're looking for a reason that it won't necessarily reduce school funding. We need something that will show how sales taxes will keep school funding the same (or increase it).

A: nothing to do with revenue changes. These former residents already aren't paying property tax (thus not funding the schools).

B is good. If retail sales increase, the sales tax may bring more revenue to the public schools. Residents of neighboring counties weren't paying property tax in Anoca, so any sales tax they contribute represents an increase.

C: Money spent on private schools is not subject to sales tax, so this will not help make up the shortfall.

D: irrelevant; someone is paying property tax (whoever owns the homes), and that tax money is used for the schools.

E: this does not explain how the sales tax will not reduce school funding

Which of the following, if true, most logically completes the argument?

Anoca County's public schools are supported primarily by taxes on property. The county plans to eliminate the property tax and support schools with a new three percent sales tax on all retail items sold in the county. Three percent of current retail sales is less than the amount collected through property taxes, but implementation of the plan would not necessarily reduce the amount of money going to Aroca County public schools, because ________.

(A) many Aroca County residents have already left the county because of its high property taxes

(B) a shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County

(C) at least some Aroca County parents are likely to use the money they will save on property taxes to send their children to private schools not funded by the county

(D) a significant proportion of parents of Aroca County public school students do not own their homes and consequently do not pay property taxes

(E) retailers in Aroca County are not likely to absorb the sales tax by reducing the pretax price of their goods

I received a PM requesting that I comment.

Today: Three percent of CURRENT RETAIL SALES is less than the amount currently collected through property taxes.
Future: The amount of tax collected from FUTURE RETAIL SALES will NOT be less than the amount currently collected through property taxes.
The correct answer choice must show how FUTURE RETAIL SALES will differ from CURRENT RETAIL SALES.

Answer choice B: A shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County.
Implication:
Because of the new mall, the number of FUTURE RETAIL SALES will be greater than the number of CURRENT RETAIL SALES, explaining how the new sales tax will bring in as much revenue as the current property tax.

The correct answer is B.

E: Retailers in Aroca County are not likely to absorb the sales tax by reducing the pretax price of their goods.
If pretax prices stay the same, then there is no reason to expect that the amount of tax collected from FUTURE RETAIL SALES will be greater than 3% of CURRENT RETAIL SALES.
Since 3% of current retail sales is LESS than the amount collected through property taxes, E does not explain how the new sales tax will bring in as much revenue as the current property tax.
Eliminate E.

divineacclivity wrote:I have a follow-up question on this one.
Since option B indicates that the sales tax may bring more revenue, option E also does the same though it doesn't say if that extra amount would cover the gap between the revenue from property and revenue from sales tax. Let me explain how option E does so:
E: retailers in the county are not likely to absorb the sales taxes by reducing the pretax price of their goods.
so, if $100 is a good's price (assuming with $5 of profit) and 3% is the tax (the argument says: 3% of current retail sales is less than ... So, 3% of current sales would be $3)
Since retails would NOT absorb the sales tax => they would maintain their profits.
So, the new price would be: cost price + profit + 3% extra of both cost and profit
= 95 + 95 * 3/100 + 5 + 5*3/100 = 95 + 2.85 + 5 + .15 = $103
Therefore, the sales tax on new price would be: 103 * 3/100 = $3.09 instead of $3 as estimated earlier (3% on CURRENT retail sales).

You are WAY overcomplicating the problem.
In most cases, the justification for the OA will be very straightforward.
A word of advice:
If you have to tell a big story to justify your answer choice, look for a better answer choice.

Hi Mitch,

I had a doubt. One of the premises says that the amount collected by the taxes on retail will be less than that from property taxes. So even if a new store is going to open, the total collection should still be less than the amount from property taxes. So in this type of question , when a new premise is introduced can we assume that this new premise can change the one mentioned in the stimulus?

b is correct answer

vivekvijayan wrote:Hi Mitch,

I had a doubt. One of the premises says that the amount collected by the taxes on retail will be less than that from property taxes. So even if a new store is going to open, the total collection should still be less than the amount from property taxes. So in this type of question , when a new premise is introduced can we assume that this new premise can change the one mentioned in the stimulus?

The portion in red misrepresents what the passage states.
The passage offers information only about CURRENT retail sales (three percent of current retail sales is less than the amount collected through property taxes).
The OA offers information about FUTURE retail sales (a shopping mall is about to open).
The crux of the argument is that -- after the new mall opens -- FUTURE retail sales are likely to be much higher than CURRENT retail sales.