Property Taxes

[kuemura]

Property taxes are typically set at a flat rate per $1000 of officially assessed value. Reassessments should be frequent in order to remove distortions that arise when property values change at differential rates. In practice, however, reassessments typically occur when they benefit the government - that is, when their effect is to increase total tax revenue.

If the statements above are true, which of the following describes a situation in which a reassessment should occur but is unlikely to do so?

(A) Property values have risen sharply and uniformly.
(B) Property values have all risen -- some very sharply, some less so.
(C) Property values have for the most part risen sharply; yet some have dropped slightly.
(D) Property values have for the most part dropped significantly; yet some have risen slightly.
(E) Property values have dropped significantly and uniformely.

Please post your answer and explanation.

[ssgomz]

Originally Posted by kuemura

Property taxes are typically set at a flat rate per $1000 of officially assessed value. Reassessments should be frequent in order to remove distortions that arise when property values change at differential rates. In practice, however, reassessments typically occur when they benefit the government - that is, when their effect is to increase total tax revenue.

If the statements above are true, which of the following describes a situation in which a reassessment should occur but is unlikely to do so?

(A) Property values have risen sharply and uniformly.
(B) Property values have all risen -- some very sharply, some less so.
(C) Property values have for the most part risen sharply; yet some have dropped slightly.
(D) Property values have for the most part dropped significantly; yet some have risen slightly.
(E) Property values have dropped significantly and uniformely.

Please post your answer and explanation.

A) likely to occur - no reason not to occur
B) same as above
D) Less likely to occur - govt does not benefit rather loses income
E)same as D

IMO answer C.

[kuemura]

OA is D. Can it be because "most" prop values declined so unlikely to do reassesment?

[xperience]

Originally Posted by kuemura

OA is D. Can it be because "most" prop values declined so unlikely to do reassesment?

Yup, you are bang on target.
Since some of the property prices have risen ideally there should be a reassessment, But what neagtes this to happen is that overall, most of the property rates have declined suggesting that if a reassessment occurs then the government is going to lose out rather than gain anything from it.

[nandini11]

whats the diff between D and E. one says all prices dropped so the loss to the govt is more than when prices of most dropped .Isn't it .

[kuemura]

In E, there is no benefit to the gov't because there is no rise in prop values, hence no tax revenue for gov't, so reassessment should not occur according to the passage.

[arindambanerji]

IMO D

Since most of the property value has dropped but some has rise, This shows that the final result will be a loss.

In this case the reassessment should have been done due to the increase due to some but it wasnt done as there is overall loss.

[abhi84v]

There is a misunderstanding with regard to why E is discounted.

Note the wording:

It says reassessment should occur due to distortions arising from differential rates

E says prices have dropped uniformly.

This is what rules out E.