The total market value of real estate in Altonville has steadily

Question

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. Moreover, the percentage of assessed value that was paid as property taxes to the city did not change during this period.

The information above most strongly supports which of the following?

(A) Money collected from property taxes provided most of Altonville’s revenue during the past four years.

(B) The percentage of Altonville’s overall revenue that was collected from property taxes did not change over the past four years.

(C) Altonville officials had proposed raising property tax rates during the past four years but never did so because of strong opposition from property owners.

(D) The total amount of revenue that Altonville has collected from property taxes has declined over the past four years.

(E) During the past four years, Altonville officials also did not increase tax rates on other sources of revenue such as retail sales or business profits.

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Official Answer

D

mikemcgarry · Accepted Answer

Dear Venmic I don't know that there's a "key" to solving percent problems. Of course .... percent = (Part)/(Whole)* 100 ... so in any CR question that discusses them, the direction of change of the percent (increase or decrease) does not necessarily have to be the same as the direction of change of the "Part", so long as the "Whole" also changes. It just a matter of keeping straight, for any particular assertion --- are they talking about the "percent", the "Part", or the "Whole"? --- because information given could be about any of those three. Let's look at this particular argument. The total market value of real estate in Altonville has steadily declined over the past four years. That's the "whole" from which real estate tax is assessed. percent = (Part)/(Whole)* 100 (percent of property tax) = (total $ amount of property taxes)/(total market value of real estate)*100 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. A bit redundant --- this sentence just points out that this same "whole" --- the "total market value of real estate" ---- is, of course, the basis of real estate tax. Property tax is based on property! Moreover, the percentage of assessed value that was paid as property taxes to the city did not change during this period. OK, now we know --- "percent" stayed the same. So, sentence #1 told us "Whole" declined", and here we also know that "percent" stays the same --- this ineluctably means: "Part" must have also decreased. That's the only way the "Whole" could decrease while the "percent" stays the same. That "Part" would be the actual monetary amount of the property tax --- that must decrease. This is exactly what the correct answer D says. Does this make sense? Mike :-)

piyatiwari · Answer

I would go with D.

Given, in 4 years,

market value of real estate >> declined
assessed value of that real estate >> declined
percentage of assessed value that was paid as property taxes >> remained same

this means that the town is now getting same percentage of tax of a lesser amount. Declining revenue.

Ex. Property assessed value was say $10K before. Tax rate was 5%. So tax = $500

4 years later, the assessed value is say 8K. Tax rate is still the same, 5%. So tax = $400

Reduced tax >> reduced tax revenue

jeevagmat · Answer

I would go with D as well... clearly A, C and E are ruled out... so left with B and D... B says "The percentage of Altonville’s  overall revenue  that was collected from property taxes did not change over the past four years." but the question says ' percentage
of assessed value' ..... so D has to be the answer

ravstime · Answer

Ans shud be D.

What is OA?
TMV of RE is decreasing ---> decrease in Prop tax.
%age of Prop Tax did not change implies TMV must be decreasing.

What is OA?

Thanks

metallicafan · Answer

+1 D

If the taxable amount has declined and the percentage to calculate the taxes has not changed, the revenue generated by this tax has declined.

robertnunzia · Answer

From my point of view the answer should be E but i am not sure. Hope you get the correct one.

mikemcgarry · Answer

Dear Robert, Do you understand why (D) is the OA? Let me know if you have any questions about my post above. Mike :-)

KarishmaB · Answer

Actually, (E) is out of scope. Just because the property tax rate was not increased, we cannot say that other tax rates were not increased either. We cannot colcude about any other rates from the given argument.

Revenue from property tax = Tax rate * Total market value of property.

If total market values goes down (given in the argument) but tax rate doesn't change (also given in the argument), revenue from property tax will go down.

If tax rate = 10%

Total market value = $1000
Revenue from property tax = 10/100 * 1000 = 100

If total market value goes down to 800,
Revenue from property tax = 10/100 * 800 = 80

Answer (D)

joshnsit · Answer

I was confused between C and D & picked C :cry:

C does support the last statement of the argument. Is there any stated reason why it is not considered for the answer choice? Thanks

KarishmaB · Answer

The reason (C) is not correct is this:

This is an inference question. You are looking for an option which you can conclude from the argument. The argument does not mention the Altonville officials at all. We do not know what they had proposed. The argument only talks about the market value, assessed value and actual tax percentage. It doesn't talk about the officials. Hence, there is no way we can conclude (C) from the given argument. Note that in inference questions, the correct option should give no new information. Option (C) is giving new information and is not the answer.

mikemcgarry · Answer

Dear joshnsit , I see the brilliant Karishma already gave you a very good answer to this question. I will just add that you may find this blog article helpful: https://magoosh.com/gmat/2013/gmat-criti ... inference/ Mike :-)

Raihanuddin · Answer

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 why B is incorrect. I am confused between B and C and If you have time I will be happy if you explain all options I would like to get response from GMATGuruNY(The Princeton Review Teacher). I like his explanation

LoneSurvivor · Answer

B is the devil...Very close almost got caught ..

gaurav2m · Answer

Hi Mike and  VeritasKarishma ,

when did you say that the percentage will be the same then how come option B is wrong?
I got confused between B and D and choose B because as mentioned in the last statement that percentage will remain the same, i.e. total revenue = total tax/total market value *100.

KarishmaB · Answer

Assessed value of real estate has declined over last 4 years (say from $100 billion to $50 billion)
% of assessed value that was paid as property taxes to the city did not change during this period. (say 1% of assessed value is paid as property tax each year. This %age has remained constant)

So 4 years back, the city got 1 billion as property tax and this year it got 0.5 billion as property tax.

A. Money collected from property taxes provided most of Altonville’s revenue during the past four years.

We don't know anything about the city's overall revenue (which is a sum of ALL taxes and duties that the city collects) and what percentage is contributed by property taxes.

B. The percentage of Altonville’s overall revenue that was collected from property taxes did not change over the past four years.

Again, we have no idea about the city's overall revenue - did it increase/decrease/remain same. We know that property tax decreased. We don't know what percentage of overall revenue was property tax 4 years ago and now so we cannot say anything about this.

C. Altonville officials had proposed raising property tax rates during the past four years but never did so because of strong opposition from property owners.

Why they didn't raise tax rate is irrelevant. We KNOW that they did not and that is all we know.

D. The total amount of revenue that Altonville has collected from property taxes has declined over the past four years.

Correct. As seen from our example above, assessed value has declined so property tax collected has declined too.

E. During the past four years, Altonville officials also did not increase tax rates on other sources of revenue such as retail sales or business profits.

We don't know anything about other sources of revenue and collection in those.

Answer (D)

AbhimanyuDad · Answer

Option D suggests that tax revenue decreased.
Though taxation is dependent on number of transactions as well.
Even if the tax rate and the assessed value remained same, there might be higher trade in the property leading to cascading and multi tax effect on a single property.
Hence concluding that tax revenue is completely dependent on Tax rate and assessed value will not be appropriate.

Please share your views.

HoneyLemon · Answer

should be D .. 
4 years ago .. let's suppose total rev from tax was 20% of total prop. value(200 ) .. so total tax amount is 40 . 
Now if total prop. value is 100 ...rev from tax is still 20% .. so total tax amount is 20 . 
so amount decreased in last 4 years .

ChiranjeevSingh · Answer

Let me explain why option B is wrong.

Let's first talk about the following percentage:

P = The percentage of your income that came from freelancing.

How do you calculate the above percentage?

P = \frac{Your \ income \ that \ came \ from \ freelancing}{Your \ total \ income}

In other words, we can rewrite your total income as the sum of your income from freelancing and your income from other sources.

P = \frac{Your \ income \ that \ came \ from \ freelancing}{(Your \ income \ from \ freelancing \ + \ your \ income \ from \ other \ sources)}

To make a statement about P, you need to be aware of your income from other sources. Right?

That's the same case here.

Let's look at the percentage talked about in option B:

P' = The percentage of Altonville’s overall revenue that was collected from property taxes

P' = \frac{Altonville's \ revenue \ that \ was \ collected \ from \ property \ taxes}{Altonville's \ total \ revenue}

Or,

P' = \frac{Altonville's \ revenue \ that \ was \ collected \ from \ property \ taxes}{(Altonville's \ revenue \ that \ was \ collected \ from \ property \ taxes \ + \ Altonville's \ revenue \ that \ came \ from \ other \ avenues)}

We have info about Altonville's revenue that was collected from property taxes. However, we have no information about Altonville's revenue that came from other avenues. Thus, we cannot say how P' has changed over the years.

Does it make sense?

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The total market value of real estate in Altonville has steadily

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