Aroca County’s public schools are supported primarily by taxes on

Question

Aroca County’s public schools are supported primarily by taxes on property. The county plans to eliminate the property tax and support schools with a new three percent sales tax on all retail items sold in the county. Three percent of current retail sales is less than the amount collected through property taxes, but implementation of the plan would not necessarily reduce the amount of money going to Aroca County public schools, because ______.

Which if the following, if true, most logically completes the argument?

(A) many Aroca County residents have already left the county because of its high property taxes

(B) a shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County

(C) at least some Aroca County parents are likely to use the money they will save on property taxes to send their children to private schools not funded by the county

(D) a significant proportion of parents of Aroca County public school students do not own their homes and consequently do not pay property taxes

(E) retailers in Aroca County are not likely to absorb the sales tax by reducing the pretax price of their goods

greenandwise · Accepted Answer

My answer is C....If more parent use their money that they save from elimination of the property taxes to send their kids to private school then that means that is less of a cost burden to the county and thus not changing the amount going to the public schools...

abhimahna · Answer

The argument says the amount of money we are getting from 3% tax is less than the amount of money we are getting from Property taxes.

Conclusion : The amount currently going via Property tax will not reduced even after the implementation of new plan.

So, even if they are not likely to reduce the price, still we will get the same money, which will be less than what is required. So, it has no effect on the conclusion.

B clearly states that a new shopping complex is going to open. Hence, may be more sales and more money. hence B is correct and E is incorrect.

greenandwise · Answer

Just read my answer to C and it makes no sense...actually I'm going to have to agree with anandnk and 700plus and go with B....if you are not going to get less revenue from your own county but not necessarily less overall then you must be getting money from another source...and B definately addresses the additional revenue source coming from shoppers of neighbouring counties....Yeah that greenandwise character has no idea what he's talking about!!! :lol:

nocilis · Answer

B) indicates the possibility of higher revenues because of increased sales from the mall.

kayser1soze · Answer

B here. IF the sales tax is replacing the property tax, but with less revenue , the only way to increase revenue would be to have more people buy things and this way increase the sales tax revenue. B comletes the arguement.

Minheequang · Answer

IMO  B

Which if the following, if true, most logically completes the argument?
Aroca County’s public schools are supported primarily by taxes on property. The county
plans to eliminate the property tax and support schools with a new three percent sales tax
on all retail items sold in the county. Three percent of current retail sales is less than the
amount collected through property taxes, but implementation of the plan would not
necessarily reduce the amount of money going to Aroca County public schools, because
______.
A. many Aroca County residents have already left the county because of its high
property taxes -->  weaken 
B. a shopping mall likely to draw shoppers from neighboring counties is about to
open in Aroca County -->  best. Many shoppers come to buy goods in Aroca County will make more retails taxes for Aroca, thereby offsetting the loss in properties tax 
C. at least some Aroca County parents are likely to use the money they will save on
property taxes to send their children to private schools not funded by the county -->  irrelevant and dont' resolve the paradox
D. a significant proportion of parents of Aroca County public school students do not 
own their homes and consequently do not pay property taxes -->  no influence because not only parents of Aroca County public students pay tax, there are also many other kinds of people who pay tax: no children-families, parents of private students, etc. And if the new law is applied, the property tax still lower than before 
E. retailers in Aroca County are not likely to absorb the sales tax by reducing the
pretax price of their goods -->  weaken

kawaljeet · Answer

Any1 who can explain why E is wrong... 
It also suggest that sales tax will not be decreased and thereby giving the strong point to conclude that sales tax will not be low.

Thanks in advance.

irishiraj87 · Answer

Option E is actually tough to decipher and I too got stumbled even after reading OE. Still let me try in my own words.

retailer in ..... are  not likely   to abosrb the sales tax by reducing the pretax price of their goods.

Now not likely means an emphatic way of saying NO. So we can consider that Retailer are not going to decrease pretax prices. So it signifies two things that retailers can do- either increase price or keep it constant.

When price is kept constant, sales tax at 3%. Total price will remain constant So constant sales tax revenue , among other things kept constant{such as no increase in customers, government incentive etc.} , will not compensate for reduction in property tax revenue.

When price is increased, sales tax at 3%. Total price will increase. Total sales may increase among other things kept constant {such as no increase in customers, government incentive etc.}. Now increased price may decrease foot fall because customer will get more incentive if they purchase products from nearby county. So total revenue generated from Salex tax will be less.

Now one can also have a case - even after price increase customer buy products from Aroca county only but certainly it would be rare.

So overall this option is inferior to option B in which explicit co-relation is produced between more customers and more revenue.

R.

dynmoz · Answer

As stated in option B, How will attracting shoppers in the mall lead to potential sales?

Aviral1995 · Answer

VeritasKarishma   egmat  could you please explain how to eliminate E?

manggarai · Answer

how big is this shopping mall exactly? lol

DavidDinh · Answer

The mall contribute how much in the total money needed to public school?

shameekv1989 · Answer

Bunuel  :- I just encountered this question as a part of GMAT Prep Question pack. Could you please update the tag and include GMAT Prep. Thanks!!

shameekv1989 · Answer

OFFICIAL EXPLANATION :-

Answer Explanation :-

Reasoning What additional information would provide a reason to believe that the county schools will not lose out on funding if the new sales tax is implemented? We are told that the sales tax would generate less money than the property tax does based on current retail sales. But if retail sales increase enough, the sales tax may end up generating even more money than the property tax does. Consequently, more money may be available for the schools. Therefore, look for an answer option suggesting that retail sales in the county will increase significantly.

A However many residents have left the county, the given information states that property tax still generates more money than the sales tax would generate based on current retail sales. Therefore this answer option gives no reason to believe that switching to the sales tax would reduce funding for the schools.

B Correct. A new shopping mall that draws shoppers from neighboring counties would likely increase Aroca County’s retail sales, generating more tax money for the schools.

C If fewer parents use the public schools, the schools may be able to cut spending and have more money left over, but that does not mean the schools will get as much money from the sales tax as they currently do from the property tax.

D Even if many parents rent rather than own their homes and thus do not pay the property tax themselves, presumably somebody does. Who pays the tax does not affect the total amount collected and is therefore irrelevant to the argument.

E This suggests that the sales tax would lead to higher after-tax retail prices, which would probably reduce retail sales and hence result in even less tax revenue for the schools—contrary to the conclusion drawn in the argument.

Bunuel · Answer

_________________________
Done. Thank you.

aggvipul · Answer

This question is meant to punish people who ignore the three percent of   current retail sales , which essentially means that the sale would increase in the near future to match the earlier collection. It is a slam shut case. Choice B

Ranasaymon · Answer

Three percent of  current retail sales  is less than the amount collected through property taxes, but implementation of the plan would not necessarily reduce the amount of money going to Aroca County public schools, because ______.

=> We are talking about the aftermath of the plan. There may something happen in future that will help us to find three percent of future retail sales will be enough to cover the funding.

(B) a shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County  (new customers=>excess sell=>excess sales tax)
 
(C) at least some Aroca County parents are likely to use the money they will save on property taxes to send their children to private schools not funded by the county  (We do not know whether some students changing schools decreases the cost of public schools)

Hoozan · Answer

Premise:  
(1) Aroca County's public schools are financially dependent on the gains through property tax
(2) The county plans to shift this financial model from "incomes from tax property" to "income from 3% retails sales".  whatever commodity is sold, the county will charge a 3% on that, and the amount collected will be used to finance the public schools 
(3)   Currently   the 3% amount collected on the  Net  retail sales is less than the amount collected through property tax

Conclusion:  The 3% plan will not necessarily reduce the amount of money needed for the public schools.  Despite the fact that the amount collected via this new plan is less than the amount collected through the property tax, the author claims that by implementing the new plan will not really be a bad idea

Because...:  We need to select an answer choice that helps us believe that the 3% retail plan will be a good idea.  In other words, we need to find the answer choice that  strengthens  the collusion

Answer choice:

(A) many Aroca County residents have already left the county because of its high property taxes:  Out of scope. This simply means that the number of people who pay the property tax is reduced. But just because the number of people paying the tax has gone down does not help us strengthen the conclusion that "the 3% retail plan must be implemented".  NOTE  the argument has clearly mentioned that  Three percent of current retail sales is less than the amount collected through property taxes  So even if the number of people paying the property tax has reduced,  the overall amount  collected from property tax is still higher.

(B) a shopping mall likely to draw shoppers from neighboring counties is about to open in Aroca County:  Correct  Notice the wording of the premise  Three percent of  current retail sales  is less  This means that currently the amount collected through the retail sales is less. This we need to strengthen our conclusion " 3% retail plan is not a bad idea  we need (B). If a shopping mall is likely the draw shoppers, the  net retail sales  will increase and thus the 3% on this increased net sales will give us a higher amount that can be used for the public schools

E.g. Lets say the Net retail sales is $100 and so 3% would mean a net amount of $3. But now if a shopping mall were to draw more shoppers and thus increase our net retail sales to $1000 then out net income collected would be 3% of 1000 --> $30.

(C) at least some Aroca County parents are likely to use the money they will save on property taxes to send their children to private schools not funded by the county:  Irrelevant.  Our argument is concerned with public schools and the plan to fund it. Using the money saved from tax property AND sending children to private schools is not going to help us strengthen out conclusion

(D) a significant proportion of parents of Aroca County public school students do not own their homes and consequently do not pay property taxes:  Irrelevant.  Again this just tells us that there are less people who pay property tax. But the argument has clearly stated that the net amount from tax is higher. So this option like (A) does not help us in any way

(E) retailers in Aroca County are not likely to absorb the sales tax by reducing the pretax price of their goods: Incorrect.  This means that the retailers aren't going to reduce their retail price so that the customers do not find the product expensive. Even if the retail do reduce their amount or do not reduce, we aren't able to prove that the 3% retail plan will help the county fund the public schools.

Note  If the retailers do reduce their retail price, the overall amount collected by the county MAY reduce. If the retailers do not reduce their retail price, there will be not effect to the argument since it is already mentioned that the amount collected from property tax is more than the retail amount collected

Hence correct answer is   (B)

achloes · Answer

KarishmaB   AndrewN

Would you mind shedding some light on what option E means and why it doesn't weaken the argument?

Thank you in advance!

Aroca County’s public schools are supported primarily by taxes on

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Aroca County’s public schools are supported primarily by taxes on

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