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Property Tax

by GmatKiss » Fri Mar 09, 2012 5:44 am
The total market value of real estate in Altonville has steadily declined over the past four years. This decline has meant that the overall figure on which the city's property tax is based-the assessed value of that real estate-has also declined. The percentage of assessed value that was paid as property taxes to the city, however, did not change from year to year during this period. The information above most strongly supports which of the following?

A. The percentage of Altonville's yearly revenue that comes from money collected in property taxes did not change over the past four years.
B. The percentage of Altonville's yearly revenue that comes from money collected in property taxes has declined steadily over the past four years.
C. The amount of revenue that Altonville collected from property taxes was lower last year than it was four years ago.
D. During the past four years, Altonville officials increased tax rates on other sources of revenue such as retail sales and business profits.
E. Altonville will soon require property owners to pay a higher percentage of the assessed value of their property as property tax.

Please explain in detail.

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by sherlock » Fri Mar 09, 2012 5:54 am
is it B

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by GmatKiss » Fri Mar 09, 2012 6:45 am
sherlock wrote:is it B

Please explain in detail.

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by sherlock » Fri Mar 09, 2012 6:58 am
the total market value of real estate decreased --> Assessed value of all real estate properties decreased
Only a fixed % of that assessed value was paid as property tax --> Total revenue collected from property tax decreased ...( here i was forced to assume that other sources of yearly revenue remained constant and other option were either opposite or weren't close enough to attack the problem ) --> % from property tax decreased .
hope its OK

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by mankey » Sun Mar 11, 2012 9:20 pm
IMO: B

Property tax=Assessed value * percentage of tax

Assessed value has continuously decreased but percentage of tax has remained same. So property tax is lower every year from its value in the previous year.

What's the OA?

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by killer1387 » Mon Mar 12, 2012 12:31 am
imo C
for B we dont know anything about other sources its out of scope

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by kohsamed » Mon Mar 12, 2012 12:40 am
C i think

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by rkanthilal » Fri Mar 16, 2012 2:04 pm
IMO C...

P1: The total market value of real estate in Altonville has steadily declined over the past four years.
P2: This decline has meant that the overall figure on which the city's property tax is based-the assessed value of that real estate-has also declined.
P3: The percentage of assessed value that was paid as property taxes to the city did not change from year to year during this period.

Question Stem: The information above most strongly supports which of the following?

This passage provides three premises. We are asked to select the conclusion that is the most strongly supported. From the passage we know that property values have steadily declined over the past four years. We also know that the assessed value has declined and that the percentage of assessed value that was paid as property taxes did not change. According to this passage, property taxes in Altonville are calculated as follows: X% * Assessed Value = Property Taxes. In other words, property taxes are equal to a percentage of the assessed value.

A. "The percentage of Altonville's yearly revenue that comes from money collected in property taxes did not change over the past four years". INCORRECT. This answer is not supported by the passage. Per P2, property taxes are based off of the assessed value. Over the past four years, the assessed value has declined and the percentage of assessed value that was paid as property taxes has stayed the same. This indicates that the revenue collected from property taxes would have declined over the same four year period.

This answer choice concludes the opposite of what is supported by the passage.


B. "The percentage of Altonville's yearly revenue that comes from money collected in property taxes has declined steadily over the past four years". INCORRECT. The passage states that MARKET VALUE of real estate has steadily declined. The passage does not state that the ASSESSED VALUE has steadily declined. All we know is that the assessed value declined over the last four years. How this decline occurred (steadily or not) we do not know.

Because the passage does not state that assessed values declined steadily, we cannot conclude that the amount collected in property taxes declined steadily. For example, there may have been no change in the assessed value for the first three years and then in the fourth year all of the real estate in Altonville may have been reassessed to reflect the drop in market values. This would result in no change in property taxes for three years and then a drop in the fourth year. This is just one example of how an unsteady decline might have occurred. The point is based on the passage we have no way of knowing how the decline happened.


C. "The amount of revenue that Altonville collected from property taxes was lower last year than it was four years ago". CORRECT. This answer is correct because it is supported by the premises. We know that the assessed value declined sometime over the past four years. We also know that the percentage of assessed value that was paid as property taxes stayed the same. These two facts can only result in lower property taxes collected last year than four years ago.

D. "During the past four years, Altonville officials increased tax rates on other sources of revenue such as retail sales and business profits". INCORRECT. This answer is not supported by the premises. The passage does not mention other sources of revenue.

E. "Altonville will soon require property owners to pay a higher percentage of the assessed value of their property as property tax". INCORRECT. This answer is not supported by the premises. The passage does not mention future changes to Altonville's property tax policy.

Hope this helps...

Edited March 21, 2012
I misread answer choice (B) so I should probably amend my above comments. Answer (B) states that, "the percentage of Altonville's yearly revenue that comes from money collected in property taxes has declined steadily over the past four years". In order to determine the "percentage of Altonville's yearly revenue that comes from money collected in property taxes" we need to know what are the other sources of Altonville's revenue. This information is not addressed in the passage. Since we do not know the other sources of Altonville's revenue, this answer choice is out of scope and is, therefore, not support by the passage.

I believe that my original explanation for (B) is also a sufficient reason to eliminate this answer choice. However, the fact that (B) is out of scope is probably a more obvious flaw and, therefore, easier to detect.