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# The total market value of real estate in Altonville has steadily decli

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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
Dear Bunuel, I believe this question is from GMAC EP 3,4. Is it possible to add GMAT Prep tag to this question?

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Done. Thank you.
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
should be C ..
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 .
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
Since I hate long explanations i will write a short one.

let's divide the text to the three phrases

the first one says that market value of Real estate declined in four years.

the second , real estate value declined (and the value determins the tax)

the third says the percentage of tax revenue of the county (or city) that comes from Real estate didn't decline.

we need to find a conclusion from these ideas (the question)

the first thing that came to my mind was that other tax revenues of the city also decreased so all the percentages stayed the same , C directly implies this prethinking hence the answer

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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
[quote="bkk145"]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.

Option B makes more sense than option C . Option B says that the amount of revenue that Altonville collected in property taxes has declined slightly over the last four years. Lets say that the yearly revenue of Altonville before the property rates started falling was 100 $out of which 30$ came from property tax based on assessed property value. Now if the assessed value of the property was to fall so would the property tax. If this were to happen the percentage of yearly revenue coming from property tax would fall too right ?
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
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SarthakHaruray wrote:
Option B makes more sense than option C . Option B says that the amount of revenue that Altonville collected in property taxes has declined slightly over the last four years. Lets say that the yearly revenue of Altonville before the property rates started falling was 100 $out of which 30$ came from property tax based on assessed property value. Now if the assessed value of the property was to fall so would the property tax. If this were to happen the percentage of yearly revenue coming from property tax would fall too right ?

We've discussed this here, but let's take a closer look at (B) using your example in this post.

Here's (B) again:
Quote:
(B) The percentage of Altonville’s yearly revenue that comes from money collected in property taxes has declined steadily over the past four years.

To show why (B) can't be the answer, we need to consider what happened to the revenue collected from all the other sources. In the four years in question, did the revenue from money collected from every other source except property taxes rise, or did it fall? Can you tell from the information in the passage?

To extend your example, let's continue saying that Altonville's revenue from taxes before property values started falling was $100, of which$30 came from property taxes. At this stage, 30% of Altonville's revenue comes from property taxes.

Now, let's say that the amount of revenue Altonville can generate from property taxes drops to $20 BUT Altonville's tax revenue from other sources drops from$70 to $30. Now, property taxes account for$20 of Altonville's $50 total income -- this comes to 40%. So, while the total revenue generated by Altonville's property taxes has fallen, the percentage of Altonville's total income that comes from the property tax has risen. Since we can't tell what happens to the revenue Altonville generates from everything other than property taxes, we can't tell which scenario has happened. Therefore, we cannot say that the statements in the passage support (B). Compare this to (C): Quote: (C) The amount of revenue that Altonville collected from property taxes was lower last year than it was four years ago. The passage tells us that the total value of property in Altonville has fallen. It also tells us that the "percentage of assessed value that was paid as property taxes" did not change during this period. If the percentage doesn't change but the initial amount you are taking that percentage from drops, the total dollar amount collected from property taxes each year will fall during the period in question. For example, if property taxes were 10% and the value of the property in Altonville drops from$100 to $50, then the amount collected in property taxes will drop from$10 to $5 per year. (C) is the answer choice that is best supported by the information in the passage. I hope that helps! Intern Joined: 26 Jan 2020 Posts: 26 Own Kudos [?]: 7 [0] Given Kudos: 125 Re: The total market value of real estate in Altonville has steadily decli [#permalink] GMATNinja wrote: SarthakHaruray wrote: Option B makes more sense than option C . Option B says that the amount of revenue that Altonville collected in property taxes has declined slightly over the last four years. Lets say that the yearly revenue of Altonville before the property rates started falling was 100$ out of which 30$came from property tax based on assessed property value. Now if the assessed value of the property was to fall so would the property tax. If this were to happen the percentage of yearly revenue coming from property tax would fall too right ? We've discussed this here, but let's take a closer look at (B) using your example in this post. Here's (B) again: Quote: (B) The percentage of Altonville’s yearly revenue that comes from money collected in property taxes has declined steadily over the past four years. To show why (B) can't be the answer, we need to consider what happened to the revenue collected from all the other sources. In the four years in question, did the revenue from money collected from every other source except property taxes rise, or did it fall? Can you tell from the information in the passage? To extend your example, let's continue saying that Altonville's revenue from taxes before property values started falling was$100, of which $30 came from property taxes. At this stage, 30% of Altonville's revenue comes from property taxes. Now, let's say that the amount of revenue Altonville can generate from property taxes drops to$20 BUT Altonville's tax revenue from other sources drops from $70 to$30. Now, property taxes account for $20 of Altonville's$50 total income -- this comes to 40%. So, while the total revenue generated by Altonville's property taxes has fallen, the percentage of Altonville's total income that comes from the property tax has risen.

Since we can't tell what happens to the revenue Altonville generates from everything other than property taxes, we can't tell which scenario has happened. Therefore, we cannot say that the statements in the passage support (B).

Compare this to (C):
Quote:
(C) The amount of revenue that Altonville collected from property taxes was lower last year than it was four years ago.

The passage tells us that the total value of property in Altonville has fallen. It also tells us that the "percentage of assessed value that was paid as property taxes" did not change during this period.

If the percentage doesn't change but the initial amount you are taking that percentage from drops, the total dollar amount collected from property taxes each year will fall during the period in question. For example, if property taxes were 10% and the value of the property in Altonville drops from $100 to$50, then the amount collected in property taxes will drop from $10 to$5 per year.

(C) is the answer choice that is best supported by the information in the passage.

I hope that helps!

Thanks a lot GMAT Ninja ! I understand now !

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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
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bkk145 wrote:
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.

Let me explain why options A and B are 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 options A and B:

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

P' = $$\frac{Altonville's-revenue-that-came-from-property-taxes}{Altonville's-total-revenue}$$

Or,

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

We have info about Altonville's revenue that came 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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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
GMATNinja wrote:
purnachandu41 wrote:

Choice (C) is correct. The total assessed value has decreased. The percentage of assessed value that was paid as property taxes to the city has not changed. If the total amount has decreased and the percentage of that amount has not changed, then the total collected must have decreased.

As for choice (B), we have no idea what has happened to the other sources of revenue. What if those other sources have decreased much more than revenue from property taxes? In that case, the percentage of Altonville’s yearly revenue that comes from money collected in property taxes may have INCREASED over the past four years. Because of this possibility, choice (B) must be eliminated.

What if the No of Households increased due to decreased Property Values, in that case revenue will increase.
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
sampathgelam wrote:
GMATNinja wrote:
purnachandu41 wrote:

Choice (C) is correct. The total assessed value has decreased. The percentage of assessed value that was paid as property taxes to the city has not changed. If the total amount has decreased and the percentage of that amount has not changed, then the total collected must have decreased.

As for choice (B), we have no idea what has happened to the other sources of revenue. What if those other sources have decreased much more than revenue from property taxes? In that case, the percentage of Altonville’s yearly revenue that comes from money collected in property taxes may have INCREASED over the past four years. Because of this possibility, choice (B) must be eliminated.

What if the No of Households increased due to decreased Property Values, in that case revenue will increase.

The number of households doesn't factor into the equation.

We're told that assessed value of the total real estate market has declined. It doesn't matter whether this value is spread out over a consistent number of households, or whether the number of households has changed -- the overall value has gone down.

We also know that the percentage of this overall assessed value paid as taxes didn't change. Again, it doesn't matter whether the number of households has changed or remained the same. For example, if real estate has an assessed value of $1,000,000 and is taxed at 5%, it doesn't matter whether this value is divvied up between more households -- either way, the city is getting 5% of$1,000,000.

So, tax revenue won't increase even if the number of households increases.

I hope that helps!
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
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.

YEAR 1 = 2000 | YEAR 2 = 2000 + 4 = 2004
Average House Price = $100 | Average House Price =$50
Assessed Value for Property Tax = $100 | Assessed Value for Property Tax =$50

Both House price and “Assessed value” decline
SAME % (Say 10%) of Assessed value
paid as “Property tax”

So Property Tax = $10 for 2000 | Property Tax =$5 for 2004

The information above most strongly supports (MUST BE TRUE) which of the following?

Solved like a Math!

(C) The amount of revenue that Altonville collected from property taxes was lower last year ($5) than it was four years ago ($10).
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
Lets say the market value was 200 four years ago
and market value now is 100.

let assessed value be 100, now its 50.

now percentage of assessed value in terms of property tax is same

100/1000-> 10%, where property tax is 1000, and 50/500-> 10% here property tax is 500, reduced from 1000

so we can see that property tax collected has reduced from the four year period.

Hence option C
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The total market value of real estate in Altonville has steadily decli [#permalink]
Understanding the argument -
The total market value of real estate in Altonville has steadily declined over the past four years. - Fact
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. - Fact
However, the percentage of assessed value that was paid as property taxes to the city did not change from year to year during this period.- Fact. But understanding this is important; if we understand this right, the question is straightforward. It says, "The percentage of assessed value did not change from year to year during this period," meaning the tax % has remained the same. So if the tax in year 1 was 10%, in year two it was 10%, in year three it was 10%, and now it is also 10%. If we do 10% of the property value here, and as the property value goes down, then the result of 10% of that X will also go down in the absolute, isn't it? Yes. That's what option C states.

Option Elimination -

(A) The percentage of Altonville’s yearly revenue that comes from money collected in property taxes did not change over the past four years. - "Altonville’s yearly revenue" is not stated in the argument. Out of scope as this is an inference question.

(B) The percentage of Altonville’s yearly revenue that comes from money collected in property taxes has declined steadily over the past four years. "Altonville’s yearly revenue" is not stated in the argument. Out of scope as this is an inference question.

(C) The amount of revenue that Altonville collected from property taxes was lower last year than it was four years ago. - ok.

(D) During the past four years, Altonville officials increased tax rates on other sources of revenue such as retail sales and business profits. - "Other sources" are out of the scope of this argument.

(E) Altonville will soon require property owners to pay a higher percentage of the assessed value of their property as property tax. - The future prediction can not be supported by the facts given. Moreover, as of now, this is the opposite of what the argument says. The argument says that the tax %age is the same, and this says it will increase. But if the taxes have not increased so far, can they not increase in the future? Maybe or Maybe not. However, that supporting information is not stated in the argument. This might be true; the option is wrong on inference, as we can't say with 100% confidence.
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Re: The total market value of real estate in Altonville has steadily decli [#permalink]
bkk145 wrote:
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.

Similar Question: https://gmatclub.com/forum/the-total-ma ... 38431.html

­

Premises:

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.

We have to find the conclusion.
The argument tells us that the market value of property has declined so its assessed value - value on which the city’s property tax is based - has also declined. But the percentage of assessed value taken as tax has remained the same. So if 2% of assessed value was taken as property tax, today also 2% is taken (though assessed value has reduced). So the amount of property tax collected must have gone down.

(A)    The percentage of Altonville’s yearly revenue that comes from money collected in property taxes did not change over the past four years.

We do not know the percentage that property taxes account for in the overall revenue of Altonville. We do not know whether it changed or stayed the same.

(B)    The percentage of Altonville’s yearly revenue that comes from money collected in property taxes has declined steadily over the past four years.

Again, we do not know what percentage of Altonville’s yearly revenue comes from money collected in property taxes and whether it has increased/decreased/stayed same.

(C)    The amount of revenue that Altonville collected from property taxes was lower last year than it was four years ago.

Since the percentage of assessed value that was calculated as tax stayed the same but the assessed value reduced, overall collection of property tax reduced.
Correct.

(D)    During the past four years, Altonville officials increased tax rates on other sources of revenue such as retail sales and business profits.

No such information provided in the argument.

(E)    Altonville will soon require property owners to pay a higher percentage of the assessed value of their property as property tax.

No such indication in the argument.