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?
This is a very tricky argument. The mayor has a new tax code: tax business on property value, not on business income. (In real world terms, these seems a most dubious plan!) Some city council members disagree for various reasons. The actual argument that concerns us is the speaker’s argument, the argument of the Urban Planner. The Urban planner disagrees with these city council members, so in essence, he agrees with the mayor and thinks the mayor’s plan is a good one. The urban planner’s stated reason is that business income fluctuates wildly, and therefore it must not be as dependable a source of income via taxes as are the steadily rising levels of property values. In other words, taxes on property will go steadily up, and therefore will make more money than the up-and-down yields from business income taxes.
The credited answer is (D): Let’s negate this. Suppose the annual percentage rise in real estate values, in property values, has been consistent less than the average annual growth rate percentages across all businesses with properties in Dismaston. Thus, even though individual business may be fluctuating, when we average over all businesses, the growth rate is higher for that average than is for property values. Thus, revenue from taxes on business income would grow faster than revenue from taxes on property. If this negation is true, it devastates the mayor’s position, and therefore devastates the position that the Urban Planner is taking. Because the negation is so destructive, the un-negated version that appears in choice (D) must be an assumption.
(A) Presumably, business that have no physical presence would not fall under this new tax code; if all these business with no physical property went from their current tax to zero, that would be a major income loss, and such a loss presumably would be obvious to the mayor who claims that there will be no loss. What tax code applies to these online businesses is unclear, but this is out of scope. This choice is incorrect.
(B) This is suggestive of the conclusion of the council member’s argument. If other Dismaston tax codes have fared about as well as similar codes in similar cities, we might expect the same for the current code. This is suggestive, but not conclusive, and it supports the wrong argument, the council member’s argument, not the urban planner’s argument. This choice is incorrect.
(C) If there’s no loophole, this would support the mayor’s plan, which would support the urban planners argument. This is a support, but not an assumption. Even if the loophole is written and the small number of vacant storefront pay nothing, this does not necessarily mean anything about the success or failure of the mayor’s plan. This choice is incorrect.
(E) Well, if we totally negate this, then it would mean that there’s total business stability in Dismaston: the same businesses now have all been in business for 50 years, and all will continue in business for at least another fifty years. It’s not particularly clear if this makes any difference at all to the mayor’s plan. Since negating it doesn’t destroy the mayor’s plan, this is not an assumption. This choice is incorrect.