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Urban planner: The mayor of Dismaston supports a new tax code that wou

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Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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Urban planner: The mayor of Dismaston supports a new tax code that would assess local businesses on the property value of their site rather than on their income or profits; the mayor argues that this change will not contribute to any loss in tax revenue for the city. Several city council members disagree, citing similar changes to tax code that were unsuccessful in cities similar to Dismaston. The council members’ argument is without merit, though, because property values rise steadily each year, while business incomes fluctuate wildly with the national economy.

Which of the following is an assumption on which the argument depends?

(A) The new tax code would not apply to the significant number of online business associated with the city that have no physical presence on a piece of property in the city.

(B) In previous years, the successes and failures of many previous Dismaston tax codes to generate income have been mirrored by similar tax codes in the the same cities similar to Dismaston in other respects.

(C) A small number of store fronts in the downtown neighborhood are vacant: under the new code, these businesses are likely to owe higher taxes than they have paid, unless some loophole is written into the law.

(D) The annual percentage rise in real estate values in Dismaston has been consistently more than the average annual growth rate percentages across all businesses with properties in Dismaston.

(E) In any year, some unsuccessful businesses will close and other businesses, some quite promising, will open, but total amount of property in the city is fixed and unchanging, providing greater stability.


For the GMAT CR questions, it's crucial to understand assumptions and the Negation Test for them. For a discussion of these issues, as well as the OE of this question, see:
http://magoosh.com/gmat/2016/gmat-criti ... questions/

Mike :-)
[Reveal] Spoiler: OA

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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 04 Apr 2016, 09:36
mikemcgarry wrote:
Urban planner: The mayor of Dismaston supports a new tax code that would assess local businesses on the property value of their site rather than on their income or profits; the mayor argues that this change will not contribute to any loss in tax revenue for the city. Several city council members disagree, citing similar changes to tax code that were unsuccessful in cities similar to Dismaston. The council members’ argument is without merit, though, because property values rise steadily each year, while business incomes fluctuate wildly with the national economy.

Which of the following is an assumption on which the argument depends?

(A) The new tax code would not apply to the significant number of online business associated with the city that have no physical presence on a piece of property in the city.

(B) In previous years, the successes and failures of many previous Dismaston tax codes to generate income have been mirrored by similar tax codes in the the same cities similar to Dismaston in other respects.

(C) A small number of store fronts in the downtown neighborhood are vacant: under the new code, these businesses are likely to owe higher taxes than they have paid, unless some loophole is written into the law.

(D) The annual percentage rise in real estate values in Dismaston has been consistently more than the average annual growth rate percentages across all businesses with properties in Dismaston.

(E) In any year, some unsuccessful businesses will close and other businesses, some quite promising, will open, but total amount of property in the city is fixed and unchanging, providing greater stability.


For the GMAT CR questions, it's crucial to understand assumptions and the Negation Test for them. For a discussion of these issues, as well as the OE of this question, see:
http://magoosh.com/gmat/2016/gmat-criti ... questions/

Mike :-)


Fell for 'E'.. my bad :(
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 14 Jul 2016, 22:40
Dear Mike,
Could you please ellaborate why D is correct.

My assessment was that, what if Business total income or profit in city was 1000M $ ( with 1% average annual growth) compared to 100M $ ( with 2% annual growth rate). Then such a growth would not be beneficial for new tax code.

However if city has significant number of online business with no property ( let o.business is 60-70% of total businesses) than they would not be paying as per new tax code and overall tax will be low.

Negating A i.e. would falsify the conclusion and mayor plan will backfire.

The new tax code would apply to the significant number of online business associated with the city that have no physical presence on a piece of property in the city.

Kindly share some wisdom
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Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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OmarFirdaus wrote:
Dear Mike,
Could you please ellaborate why D is correct.

My assessment was that, what if Business total income or profit in city was 1000M $ ( with 1% average annual growth) compared to 100M $ ( with 2% annual growth rate). Then such a growth would not be beneficial for new tax code.

However if city has significant number of online business with no property ( let o.business is 60-70% of total businesses) than they would not be paying as per new tax code and overall tax will be low.

Negating A i.e. would falsify the conclusion and mayor plan will backfire.

The new tax code would apply to the significant number of online business associated with the city that have no physical presence on a piece of property in the city.

Kindly share some wisdom


Hello, Omar.

This is the conclusion of the argument.

"The council members’ argument is without merit, though, because property values rise steadily each year, while business incomes fluctuate wildly with the national economy."

This is a correct conclusion if business incomes fluctuate more in the lower direction.
But if business fluctuates more in the growth direction then the conclusion is wrong .
In other words, we should understand what we have in average: business income growth bigger than property average growth or vice versa.

In D we clearly see that growth of property will grow faster than the growth of business incomes.

A is wrong because we don't know exactly how many online businesses in this city.
For example, the city has 99.99% of tax revenue from offline businesses and 0.01% from online. Then city doesn't care about taxes from online.
But if the city has 99,99% of tax revenue from online businesses than argument A creates a problem.
So for argument A to be correct we need to know the ratio of online to offline businesses.
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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OmarFirdaus wrote:
Dear Mike,
Could you please ellaborate why D is correct.

My assessment was that, what if Business total income or profit in city was 1000M $ ( with 1% average annual growth) compared to 100M $ ( with 2% annual growth rate). Then such a growth would not be beneficial for new tax code.

However if city has significant number of online business with no property ( let o.business is 60-70% of total businesses) than they would not be paying as per new tax code and overall tax will be low.

Negating A i.e. would falsify the conclusion and mayor plan will backfire.

The new tax code would apply to the significant number of online business associated with the city that have no physical presence on a piece of property in the city.

Kindly share some wisdom

Dear Omar,
I see that Harley1980 already gave you a good response, and I am happy to respond as well. :-)

What is very tricky about this argument is that there are layers of arguments packed inside one another.
1) The mayor makes an argument for his tax plan.
2) The city council may a counterargument against (1)
3) The author of the prompt makes a counterargument against (2), essentially supporting (1)
The target of any GMAT CR prompt (assumption, strengthen, weaken, etc.) is ALWAYS the argument of the author of the prompt argument. Here, we are asked to find an assumption for (3), which necessarily would support (1) as well.

We are not trying to damage the mayor's plan----we are trying to support it, because (3) supports (1).

Does all this make sense?
Mike :-)
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 17 Jul 2016, 10:25
Got it ............
Thanks HARLEY & MIKE.
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 03 Nov 2017, 13:12
D is a very common pattern in gmat. A is also another pattern, and in this question, A is a trap n/c A does not concern directly with the revenues or profits from taxes.
B,C,E are definitely out of scope.
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 11 Nov 2017, 06:33
mikemcgarry wrote:
Urban planner: The mayor of Dismaston supports a new tax code that would assess local businesses on the property value of their site rather than on their income or profits; the mayor argues that this change will not contribute to any loss in tax revenue for the city. Several city council members disagree, citing similar changes to tax code that were unsuccessful in cities similar to Dismaston. The council members’ argument is without merit, though, because property values rise steadily each year, while business incomes fluctuate wildly with the national economy.

Which of the following is an assumption on which the argument depends?

(A) The new tax code would not apply to the significant number of online business associated with the city that have no physical presence on a piece of property in the city.

(B) In previous years, the successes and failures of many previous Dismaston tax codes to generate income have been mirrored by similar tax codes in the the same cities similar to Dismaston in other respects.

(C) A small number of store fronts in the downtown neighborhood are vacant: under the new code, these businesses are likely to owe higher taxes than they have paid, unless some loophole is written into the law.

(D) The annual percentage rise in real estate values in Dismaston has been consistently more than the average annual growth rate percentages across all businesses with properties in Dismaston.

(E) In any year, some unsuccessful businesses will close and other businesses, some quite promising, will open, but total amount of property in the city is fixed and unchanging, providing greater stability.


For the GMAT CR questions, it's crucial to understand assumptions and the Negation Test for them. For a discussion of these issues, as well as the OE of this question, see:
http://magoosh.com/gmat/2016/gmat-criti ... questions/

Mike :-)


mikemcgarry Wonderful question Mike
No doubt you are the best.
Though it took me around 4 minutes to solve it, but the time was worth spent on the question(( the answer was correct :) )
Was confused a bit between D and E
but the tired negation on E and wasnt getting any good conclusion destruction
D is a clear winner here
My takeaways
(D) The annual percentage rise in real estate values in Dismaston has been consistently more than the average annual growth rate percentages across all businesses with properties in Dismaston.
Given in the question property values rise steadily each year, while business incomes fluctuate wildly with the national economy.
Here anual percentage rise of real estate values (( properties )) is consistent means that property value rise every year consistently.

the average annual growth rate of businesses with properties signifies the business income fuctuations (([color=#9e0039]An average encapsulates the total sum/ total number , now this could mean
that sometimes the numbers contributing to the sum can be high and some time low
[/color]
in all they are not consistent, but fluctuating
negating this breaks the conclusion provided by urban planner
P.s. wonderful question Mike
:)
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 13 Dec 2017, 03:47
Hi mikemcgarry

I have one question. The Mayor's argument is "this change will not contribute to any loss in tax revenue for the city", so as per choice D, " The annual percentage rise in real estate values in Dismaston has been consistently more...", even if businesses make more growth, as long as amount of property and value of the properties raise, city can continue to get revenue as the mayor claims. I am not able to see how negation of D weakens the argument.

Had mayor argued that new tax code based on property tax would be better than tax code based on businesses profits, choice D would have been perfect assumption.

I felt choice E is the assumption. Please help me eliminate E.

Thanks
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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hellosanthosh2k2 wrote:
Hi mikemcgarry

I have one question. The Mayor's argument is "this change will not contribute to any loss in tax revenue for the city", so as per choice D, " The annual percentage rise in real estate values in Dismaston has been consistently more...", even if businesses make more growth, as long as amount of property and value of the properties raise, city can continue to get revenue as the mayor claims. I am not able to see how negation of D weakens the argument.

Had mayor argued that new tax code based on property tax would be better than tax code based on businesses profits, choice D would have been perfect assumption.

I felt choice E is the assumption. Please help me eliminate E.

Thanks

Dear hellosanthosh2k2,

I'm happy to respond. :-)

First of all, this is tricky. We are finding the assumption to the argument, but which argument? The major makes an original argument. Then the city council makes a conflicting argument. Then the urban planner, the speaker here, makes the argument that, "council members’ argument is without merit." This is the argument that we are trying to support: we are trying to find the assumption of the urban planner's argument, the argument against the city council's claim.

I'll also say: to really get into the logic of GMAT CR, you can't think in terms of abstract logic: instead, you have to think like a business person. See:
GMAT Critical Reasoning and Outside Knowledge
Suppose a business person has to choose between option A and option B. Suppose he chooses option A and gains $10,000, but if he had chosen option B, he would have made $50,000. In business terms, he lost money by choosing A. If his boss were reprimanding him for choosing A rather than B (suppose there was some data that this person had overlooked about the advantage of B), then telling his boss, "But A still made money" would be a useless and pointless defense and the boss is going to get madder if she hears that. If you make a choice that makes you less money than you could have made, then for all intents and purposes, you have lost that money.

Thus, if (D) is false, if business profits rise faster than real estate, then by choosing this plan, Dismaston would be making less money in terms of tax income than it could have made, and the city council would be in every position to tell the mayor that his plan, his choice of taxing property, resulted in Dismaston losing money it could have made. That's a loss and the city council could accuse the mayor on this basis. At that point, it would be completely useless for the mayor to object, "Even though we made less money, we still made money."

Now, let's think about (E). Here's (E):
(E) In any year, some unsuccessful businesses will close and other businesses, some quite promising, will open, but total amount of property in the city is fixed and unchanging, providing greater stability.

So, from this we know property is fixed, so presumably income from property tax would be fixed. How does that compare to business income? What does this choice imply about business income?

We know some unsuccessful (i.e. low income, low profit) business close (a small loss), and other open (a gain). Some of the ones that open are very successful ==> high income, high profit ==> high gain in the current tax structure. So, overall, business has some loss and some gain.

How does the net result of gain & loss in revenue from income/profit tax compare to the relatively constant value of property tax? It's really unclear! It could be that the income/revenue has a net gain, so that it does better than the fixed constant of property tax, or it could be that the latter comes out to a net loss, so that the fixed constant value of property tax is better. We don't know which way it will go.

If we have no idea whether a statement is strengthener or a weakener, then it most certainly can't be an assumption of the argument.

Does all this make sense?
Mike :-)
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Re: Urban planner: The mayor of Dismaston supports a new tax code that wou [#permalink]

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New post 13 Dec 2017, 13:03
mikemcgarry wrote:
hellosanthosh2k2 wrote:
Hi mikemcgarry

I have one question. The Mayor's argument is "this change will not contribute to any loss in tax revenue for the city", so as per choice D, " The annual percentage rise in real estate values in Dismaston has been consistently more...", even if businesses make more growth, as long as amount of property and value of the properties raise, city can continue to get revenue as the mayor claims. I am not able to see how negation of D weakens the argument.

Had mayor argued that new tax code based on property tax would be better than tax code based on businesses profits, choice D would have been perfect assumption.

I felt choice E is the assumption. Please help me eliminate E.

Thanks

Dear hellosanthosh2k2,

I'm happy to respond. :-)

First of all, this is tricky. We are finding the assumption to the argument, but which argument? The major makes an original argument. Then the city council makes a conflicting argument. Then the urban planner, the speaker here, makes the argument that, "council members’ argument is without merit." This is the argument that we are trying to support: we are trying to find the assumption of the urban planner's argument, the argument against the city council's claim.

I'll also say: to really get into the logic of GMAT CR, you can't think in terms of abstract logic: instead, you have to think like a business person. See:
GMAT Critical Reasoning and Outside Knowledge
Suppose a business person has to choose between option A and option B. Suppose he chooses option A and gains $10,000, but if he had chosen option B, he would have made $50,000. In business terms, he lost money by choosing A. If his boss were reprimanding him for choosing A rather than B (suppose there was some data that this person had overlooked about the advantage of B), then telling his boss, "But A still made money" would be a useless and pointless defense and the boss is going to get madder if she hears that. If you make a choice that makes you less money than you could have made, then for all intents and purposes, you have lost that money.

Thus, if (D) is false, if business profits rise faster than real estate, then by choosing this plan, Dismaston would be making less money in terms of tax income than it could have made, and the city council would be in every position to tell the mayor that his plan, his choice of taxing property, resulted in Dismaston losing money it could have made. That's a loss and the city council could accuse the mayor on this basis. At that point, it would be completely useless for the mayor to object, "Even though we made less money, we still made money."

Now, let's think about (E). Here's (E):
(E) In any year, some unsuccessful businesses will close and other businesses, some quite promising, will open, but total amount of property in the city is fixed and unchanging, providing greater stability.

So, from this we know property is fixed, so presumably income from property tax would be fixed. How does that compare to business income? What does this choice imply about business income?

We know some unsuccessful (i.e. low income, low profit) business close (a small loss), and other open (a gain). Some of the ones that open are very successful ==> high income, high profit ==> high gain in the current tax structure. So, overall, business has some loss and some gain.

How does the net result of gain & loss in revenue from income/profit tax compare to the relatively constant value of property tax? It's really unclear! It could be that the income/revenue has a net gain, so that it does better than the fixed constant of property tax, or it could be that the latter comes out to a net loss, so that the fixed constant value of property tax is better. We don't know which way it will go.

If we have no idea whether a statement is strengthener or a weakener, then it most certainly can't be an assumption of the argument.

Does all this make sense?
Mike :-)


Hi mikemcgarry, Thank you for detailed explanation, it makes lot of sense. +1 to you
Re: Urban planner: The mayor of Dismaston supports a new tax code that wou   [#permalink] 13 Dec 2017, 13:03
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