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# CR: Property tax (CR 1000, TestA, Q17)

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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  15 Feb 2008, 07:36
kyatin wrote:
gixxer1000 wrote:
incognito1 wrote:
(D) If Proposition 13 is not repealed, identical properties will continue to be taxed at different rates. Incorrect. The reason why identical properties in our example are taxed differently is because they were bought during different times. The reference to "identical properties" is misleading here, what if two identical houses were bought in the same year - would Proposition 13 tax them differently? No. Even though they are identical.

That's the whole point D is trying to make. The reason that people are paying different rates under prop 13 is because they bought the identical properties at different years. Without propisition 13 you would pay the exact same rate no matter what. That means that every year the value of the property would be assed and you would pay 3% of that. So even if you bought the house 11 years ago for $75,000 it is now worth$200,000 because the identical property was just purchased for that amount. You now pay $6,000(3% of$200,000) just like the homeowner who purchased the property this year.

With Proposition 13, if you bought your house 11 years ago for $75,000, your property tax would be approximately$914 a year (1 percent of $75,000 increased by 2 percent each year for 11 years); and if your neighbor bought an identical house next door to you for$200,000 this year, his tax would be $2,000 (1 percent of$200,000). Without Proposition 13, both you and your neighbor would pay $6,000 a year in property taxes (3 percent of$200,000).

I wish we can get in a room to discuss...it would be fun.

I am convinced now that its B, for me.

If you read carefully the underlined text in above comment....you and your neighbour bought "identical" houses in different year....if you both sell it this year then new owners will pay same tax with proposition 13....SO D does NOT have to be true.

I agree, it so hard to convey things with only written words.

I also agree that IF you bought identical properties in the same year under prop 13 you would pay the same amount it taxes. So for prop 13 everyone would always have to buy identical properties at the same time or they will pay different rates.

Without prop 13 you are guaranteed to pay the same rate on identical properties no matter when you purchase the house.

Statement B says without prop 13 EVERY home owner will experience an increase in taxes.

If you bought a home 11 years ago you would be paying 22% for property tax. If they repeal it your tax rate would drop to 3%. That is a substantial decrease not increase.

Here would be the options for the home owner who bought the house 11 years ago:
With: $75,000 x 22% =$16,500
Without:$200,000 x 3% =$6,000

B is clearly wrong.
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  15 Feb 2008, 10:18
Expert's post
gixxer1000 wrote:
If you bought a home 11 years ago you would be paying 22% for property tax.
............
Here would be the options for the home owner who bought the house 11 years ago:
With: $75,000 x 22% =$16,500
.........

Sorry, I don't understand your logic:
"if you bought your house 11 years ago for $75,000, your property tax would be approximately$914 a year (1 percent of $75,000 increased by 2 percent each year for 11 years)" 914$ instead of 16'500$_________________ HOT! GMAT TOOLKIT 2 (iOS) / GMAT TOOLKIT (Android) - The OFFICIAL GMAT CLUB PREP APP, a must-have app especially if you aim at 700+ | PrepGame Director Joined: 26 Jul 2007 Posts: 541 Schools: Stern, McCombs, Marshall, Wharton Followers: 5 Kudos [?]: 123 [0], given: 0 Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink] 15 Feb 2008, 11:02 walker wrote: gixxer1000 wrote: If you bought a home 11 years ago you would be paying 22% for property tax. ............ Here would be the options for the home owner who bought the house 11 years ago: With:$75,000 x 22% = $16,500 ......... Sorry, I don't understand your logic: "if you bought your house 11 years ago for$75,000, your property tax would be approximately $914 a year (1 percent of$75,000 increased by 2 percent each year for 11 years)"

914$instead of 16'500$

I see my error
I was increasing the rate by 2% a year instead of increasing the tax by 2%.

Still the point I was trying to make is EVERY homeowner will NOT experience a substantial increase

Another ex. (I'll double check my math) :
If you purchased a house 11 years ago for $75,000 and now it's worth$80,000.
With prop 13 you would pay $914 ($75,000 x 1%= $750 then increase$750 by 2% for 10 more years)
If they repealed it you would pay $2400 ($80,000 x 3% = $2400) So inorder for B to be true that would mean that everyones properties would have to increase in value at a considerable rate. I dont see how you can guarantee that by the passage. The only thing that leads me to think that your right is that it says every homeowner is likely to experience a substantial increase in property taxes. I guess you could interpret that as 'definitely maybe'. So I guess that gives you some room to make assumptions. And without D I would go with B. The problem is that I can find any scenario to disprove D. The only way D would not be correct is if under prop 13 everyone ALWAYS bought identical properties at the exact same time. Because if that doesnt happen, identical properties will be taxed at different rates. I know B is the OA so I'm beginning to thing this was just a problem that was not thought all the way through. Sorry for dragging this out. CEO Joined: 17 Nov 2007 Posts: 3574 Concentration: Entrepreneurship, Other Schools: Chicago (Booth) - Class of 2011 GMAT 1: 750 Q50 V40 Followers: 433 Kudos [?]: 2348 [0], given: 359 Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink] 15 Feb 2008, 12:17 Expert's post This question was in my mind for whole day Some fresh remarks: 1. The question is LSAT question rather than GMAT one. in GMAT "conclusion" questions are "must be true" questions. I'm not a guru in LSAT but I read some links and found that LSAR Logical Reasoning "conclusion" questions are not necessarily "must be true" one. (Please, correct me if I'm wrong). But I did not find good logic for such LSAT questions (due to lack of time and LSAT skills). 2. Anyway, the answers: A,C are out - "unconstitutional" and "preventing inflation" are far away from the argument. (B) If Proposition 13 is repealed, every homeowner is likely to experience a substantial increase in property taxes. Here we have extreme generalization (every) with very tricky word "likely" that defends the generalization. (D) If Proposition 13 is not repealed, identical properties will continue to be taxed at different rates. I see two problems: 1. "identical properties" vs. "identical properties with different year of buying". There were some "identical properties" with the same year of buying that were and will be taxed at the same rates. 2. "continue". We have to assume that the Proposition 13 is a proposition to existing low rather than new one. (E) Proposition 13 has benefited some homeowners more than others. Here we also generalization (homeowners) with word "some" that defends the generalization. I cannot find something wrong with E. Only "benefited" bothers me. So I between B and E. E is slightly better Any ideas? _________________ HOT! GMAT TOOLKIT 2 (iOS) / GMAT TOOLKIT (Android) - The OFFICIAL GMAT CLUB PREP APP, a must-have app especially if you aim at 700+ | PrepGame Senior Manager Joined: 29 Jan 2007 Posts: 450 Location: Earth Followers: 2 Kudos [?]: 47 [0], given: 0 Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink] 15 Feb 2008, 12:50 Walker between B and E ...I would still go with B Read question stem again....what is author likely arguing for? The tone of the arguments is not about "some people getting benefited more than others" It is more about increase in tax due to repealing of proposition 13. CEO Joined: 17 Nov 2007 Posts: 3574 Concentration: Entrepreneurship, Other Schools: Chicago (Booth) - Class of 2011 GMAT 1: 750 Q50 V40 Followers: 433 Kudos [?]: 2348 [0], given: 359 Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink] 15 Feb 2008, 14:48 Expert's post kyatin wrote: ...I would still go with B Read question stem again....what is author likely arguing for? The tone of the arguments is not about "some people getting benefited more than others" It is more about increase in tax due to repealing of proposition 13. I've tried to go back: from conclusion to the argument. (B) If Proposition 13 is repealed, every homeowner is likely to experience a substantial increase in property taxes. I don't understand why the author has to introduce "an identical house". it does not help to arrive at the conclusion. It would be very great to find OE _________________ HOT! GMAT TOOLKIT 2 (iOS) / GMAT TOOLKIT (Android) - The OFFICIAL GMAT CLUB PREP APP, a must-have app especially if you aim at 700+ | PrepGame Senior Manager Joined: 26 Jan 2008 Posts: 267 Followers: 3 Kudos [?]: 82 [0], given: 1 Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink] 15 Feb 2008, 16:58 walker wrote: Wasi, N. and White, M.J. (2005). Property tax limitations and mobility: The lock-in effect of California’s Proposition 13, NBER Working Paper No. W11108. or INTERNATIONAL REAL ESTATE REVIEW 2007 Vol. 10 No. 1: pp. 26 - 47 Residential Stability or Rational Bubble: Proposition 13 in Southern California Mark Hoven Stohs For example, a buyer A purchases a house for$100,000 in 1975. Suppose
further that the property tax rate is 1%, property value increases at the rate of
10% per year and the inflation rate is 2%.4 In 2005 buyer A’s taxes would
have risen to $1,811. In 2005 buyer B would pay$1,744,940 for an
identical house and receive a property tax bill of $17,449. Therefore, buyer A’s annual property subsidy is$15,638 (= $17,449 –$1,811). ..........

walker, I think you just nailed it!
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  15 Feb 2008, 19:57
Expert's post
incognito1 wrote:
walker, I think you just nailed it!

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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  16 Feb 2008, 10:36
So whats the conclusion here
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  16 Feb 2008, 10:43
kyatin wrote:
So whats the conclusion here

walker located Proposition 13 on the net, and having read the relevant excerpt, it looks like (E) is the correct answer since it explicitly mentions A's subsidy in the last statement (hence A benefited more than B). The OA is incorrect.

One can argue that this question is incomplete as the author does not make any argument in the given statements. Which is why they should refrain from having such answer choices in the actual exam.
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  16 Feb 2008, 11:03
Expert's post
incognito1 wrote:
One can argue that this question is incomplete as the author does not make any argument in the given statements. Which is why they should refrain from having such answer choices in the actual exam.

I agree. I read some posts of guys that passed GMAT and guys often said: "CR was pretty straightforward". Of all OG CR I fount only one CR that was not airtight (for me, of course ).
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  21 Feb 2014, 21:34
I do not agree with B for the sole reason that it used the extreme word "every" in the choice.
In a scenario, where a homeowner has bought a property for \$500K, without proposition 13, he will end up paying 3% of 200K (doesn't state anywhere in the argument that it will be any different than this percentage value) which eventually leads me to believe that not everyone ends up paying high property tax without proposition 13.

Suggestions?
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  25 Feb 2014, 10:21
Hey Asseem.

Let me see if I can help.

In general - good spot. the word 'every' is a key one to watch out for as it is often a signifier of a response that is too extreme.

HOWEVER - that is not the case here.

The key thing to understanding this is (as is often the case) to look closely at the question being asked.

Here it asks 'which argument is the author most likely trying to support'

What we are NOT looking for is 'which is the logical conclusion'

As we are just looking for the author's intentions, our burden of proof is lower. We can see which makes most sense from the evidence we have.

In this case it is clearly B. All the others make no sense at all

Does that help?

James
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Re: CR: Property tax (CR 1000, TestA, Q17) [#permalink]  10 Mar 2014, 06:06
Thanks James for pointing out what i was missing while reading this question repeatedly.

Here it asks 'which argument is the author most likely trying to support
What we are NOT looking for is 'which is the logical conclusion

I am now in agreement with you and others who opted for B on this one.
In the past few days, i looked at few CR exercises and realized that we are not supposed to derive any logic based on real world scenarios.
We absolutely must stick to the context and details presented in the argument. In the example provided, the property tax for both homeowners increases if proposition 13 is repealed.
Re: CR: Property tax (CR 1000, TestA, Q17)   [#permalink] 10 Mar 2014, 06:06

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