SN_09 wrote:
GMATNinja KarishmaB MartyMurray AjiteshArun BunuelHello Experts,
Can one of you please help decode this question? While I understood the question stem broadly, I could not understand any of the answer choices or even eliminate them. This was a question in the official gmat prep mock test, and I made an uneducated guess. It would help if someone can help with the argument breakdown and discuss each answer choice.
How do we go about approaching questions of this difficulty level?
Thanks in advance!
Hi SN_09,
1. RE tax in California is levied as a % of a property's assessed value.
2. Late last year, California reassessed all properties.
3. Compared with the previous assessment 3 years ago, the
mean assessed property value was
considerably lower.
4. But
the mean real-estate tax bill sent to California’s property owners this year is likely to be no lower than last year's. That is,
this year's mean RE tax bill (based on the reassessed values) will be {equal to | higher than} last year's mean RE tax bill (based on the old assessed values).
We need to explain how the tax bill will not be lower even though assessed property value is lower. It's best to think of this as a paradox question.
Now, given that the tax is levied as a % of the assessed value, even if the assessed value goes down, we need to look at the other element of the bill (the %) before we can say whether the bill will go down or not. That is, if the % remains the same or goes down, we can be quite sure that the bill will also go down. However,
if the % increases, we can't say whether the bill will go down, even if the assessed value is lower.
Bunuel wrote:
A. the assessed value of relatively modest properties in California went down more, on average, than that of more valuable properties
A. This option tells us that the assessed value of some properties dropped more, on average, that the assessed value of other properties. This gives us more information about the drop in assessed value. It doesn't change the fact that there's a drop in assessed value.
Bunuel wrote:
B. actual selling prices of properties sold in California so far this year have been higher, on average, than assessed values
B. We can remove this option because the RE tax is calculated as a % of assessed value.
Actual selling price is irrelevant. Also, it's easy to imagine a situation in which only some houses are sold (maybe the ones that can get a good selling price), while most houses are not sold.
Bunuel wrote:
C. a likely consequence of declining real-estate values in California will be a general slow-down in the local economy
C. A general slowdown in the local economy doesn't help us understand why the tax bill be not be lower even though the mean assessed value is lower. Even if we stretch a bit, taxes are normally cut during slowdowns, so if the RE tax % is reduced, we would see the opposite outcome (lower RE tax bill).
Bunuel wrote:
D. there have been many real-estate transactions over the last year, and many current property owners did not own California property a year ago
D. We're looking at
mean assessed value, and
mean RE tax bill. Even if there are many new property owners, that will affect only the total (absolute) assessed value.
Bunuel wrote:
E. the real-estate tax rate in California has not been set for this year, but will probably be higher than last year's rate
E. Correct. If the % is likely to be higher, that increase could overcome the decrease in assessed value and lead to a higher (or not lower) mean RE tax bill.
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