Amtown’s public schools are supported primarily by town property taxes

Question

Amtown’s public schools are supported primarily by town property taxes. The town plans to eliminate the property tax and support schools with a new four-percent sales tax on all retail items sold in town. Four percent of current retail sales is substantially less than the amount currently collected through property taxes, but town planners believe that adopting this plan will not have a negative impact on the funds available for the town’s public schools because ______.

Which of the following most logically completes the argument?

(A) a new shopping center that will draw shoppers from neighboring towns will open this year in Amtown

(B) many Amtown residents are planning to leave town due to high property taxes

(C) a number of parents who currently send their children to Amtown’s public schools do not pay property taxes.

(D) the sales tax in neighboring towns is much higher than four percent

(E) Amtown was recently featured in a magazine as one of the top 10 weekend getaways from a nearby city.

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Bunuel · Accepted Answer

OFFICIAL EXPLANATION

The argument describes a sales tax plan that is expected to bring in the same amount of money as the current property tax, despite the fact that current sales tax revenues are lower than current property tax revenues. The correct answer will include information that will involve the sales tax bringing in more money than is presently the case.

(A) CORRECT.  If a new shopping center is opening in Amtown, the retail sales in the town, and the receipts from the sales tax, would be expected to rise. This would potentially enable the sales tax to generate at least as much money as the current property tax.

(B) The fact that some residents might leave Amtown is irrelevant, as this may not necessarily have an impact on property tax or sales tax receipts, particularly if the plan is adopted and the residents change their minds. Additionally, the argument states that the sales tax will not have a negative impact on the funds available for the town’s public schools.

(C) The fact that some parents do not pay property taxes is irrelevant to the sales tax plan generating as much money for the public schools as the current property tax.

(D) Higher taxes in surrounding areas might encourage individuals to shop at Amtown. However, this phenomenon would already be factored into current sales tax receipts, which are less than the current property tax.

(E) It could be argued that this magazine profile would increase immediate tourism in Amtown, and thus sales tax receipts. However, any economic impact would depend upon a direct link between the magazine article, increased visitors, and money spent by those visitors, all of which must be assumed. Additionally, a magazine article is unlikely to have a sustainable effect over a long period of time, which is necessary for the sales tax to provide funds equivalent to those provided by the current property tax.

vsrsankar · Answer

Yes, I go with option 'A'.
'B' can be eliminated because, effect on property tax is irrelevant as we are weighing the option of sales tax. 
'C' can be eliminated as the number of parents from whom property tax is not being collected does not matter here because we are weighing the option of sales tax.
'D' can be eliminated because, sales tax of other towns is irrelevant.
'E' seems a bit irrelevant and not an increase in sales tax hinted.
Option 'A' seems better, as the new shopping centre may enhance sales tax which may compensate the gap that is expected from adoption of new plan.

ChrisLele · Answer

We need an answer choice that explains how the 4% retail tax will be able to generate enough revenue to match the revenue generate from the previous property tax.

(A) provides such an explanation: a new mall, bringing customers from other cities, will lead to more people buying products. Customers will have to pay 4% retail tax and thus enough revenue will be generated so that revenues from sales tax will be at least as high as those from the erstwhile property tax. CORRECT

(B) Fewer residents means fewer people being charged the 4% and presumably less revenue coming from the retail tax. INCORRECT

(C) Does not relate to retail tax.

(D) The neighboring town is irrelevant.

(E) In of itself a Top 10 billing in a magazine does not mean that Amtown can expect a massive influx of money spent on retail. At least nowhere as much as Amtown can expect a surge in revenues from a retail sales, the way it can with the opening of the mall in (A).

Hope that helps

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Christopher Lele
Magoosh Test Prep

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semwal · Answer

Amtown’s public schools are supported primarily by town property taxes. The town plans to eliminate the property tax and support schools with a new four-percent sales tax on all retail items sold in town. Four percent of current retail sales is substantially less than the amount currently collected through property taxes, but town planners believe that adopting this plan will not have a negative impact on the funds available for the town’s public schools because ______.

Which of the following most logically completes the argument?   WE HAVE TO INCREASE RETAIL SALES SUCH THAT 4 % OF RETAIL SALES COLLECTED AS SALES TAX EXCEEDS THE PROPERTY TAXES, IN FUTURE

A) a new shopping center that will draw shoppers from neighboring towns will open this year in Amtown...  WILL INCREASE AMOUNT COLLECTED THROUGH SALES TAX.....CORRECT  
b) many Amtown residents are planning to leave town due to high property taxes.....  WHY ARE THEY PLANNING TO LEAVE SINCE PROPERTY TAXES ARE BEING ELIMINATED...LET THEM...MORE OVER EVEN IF THEY WERE TO LEAVE AND PROPERTY TAXES WERE TO CONTINUE...SOMEBODY ELSE WOULD HAVE PAID THE SAME.....IRRELEVANT  
c) a number of parents who currently send their children to Amtown’s public schools do not pay property taxes.... IRRELEVANT .
d) the sales tax in neighboring towns is much higher than four percent......  WHAT NEIGHBORING TOWN DOES IS IRRELEVANT  
e) Amtown was recently featured in a magazine as one of the top 10 weekend getaways from a nearby city.....  THIS WAS A THING OF THE PAST....EVEN WITH THIS, THE Four percent of current retail sales was substantially less than the amount currently collected through property taxes... WE HAVE TO LOOK FOR WHAT IS IN STORE IN FUTURE THAT WILL ENHANCE COLLECTION THROUGH SALES TAX ... INCORRECT

Push2808 · Answer

GMATNinja   VeritasKarishma

Need your help here. I got this answer right. But here in the first option, how can I assume that the taxes from the excess revenue will cover the costs?

KarishmaB · Answer

Schools are supported by property taxes.
Plan is to switch to 4% retail sales tax for supporting schools. 
4% of Retail sales is less than amount collected through property tax.

town planners believe that adopting this plan will not have a negative impact on the funds available for the town’s public schools because ___

We need to give a reason why switching to 4% retail sales tax may be sufficient for schools. Why the plan may work.

Some reasons come to mind - What if the property tax collected used to be in excess of what is required by schools. We know that the schools were supported by property taxes but were all the property taxes collected used up by the schools? May be not. Perhaps some part of the taxes were used for other purposes. 
Alternatively, what if retail sales is expected to see a jump soon? Then the 4% of retail sales may become sufficient for the schools. Note that we don't need to prove beyond doubt that the plan will work. We need to say why the planners believe that the plan will work.

(A) a new shopping center that will draw shoppers from neighboring towns will open this year in Amtown

Correct. This gives a reason why the plan may work. A new shopping centre will open which will draw shoppers from other towns. Hence, the retail sales is likely to increase. The planners believe that this increase in the retail sales and hence the collection will become sufficient for schools. 
 Push2808

(B) many Amtown residents are planning to leave town due to high property taxes

Doesn't help the plan.

(C) a number of parents who currently send their children to Amtown’s public schools do not pay property taxes.

Irrelevant

(D) the sales tax in neighboring towns is much higher than four percent

Irrelevant

(E) Amtown was recently featured in a magazine as one of the top 10 weekend getaways from a nearby city.

Irrelevant. We are not given that this feature will increase tourist activity and hence retail sales.

Answer (A)

VerbalBot · Answer

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Amtown’s public schools are supported primarily by town property taxes

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Amtown’s public schools are supported primarily by town property taxes

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