LOL! Why am I NOT surprised??? Discredited by whom? The Patrice Lamumba school of economics perhaps! LOL!By the IRS, the GAO, and a host of other independent economists. The IRS has contracted IBM to develop a realistic model of compliance burdens based on updated understandings and using modern technology. (BTW, regardless of what y'all would like people to believe, I don't make this stuff up.)
TAX ADMINISTRATION: IRS Is Working Improve of Compliance Burden - GAO, May 2000
Appendix I: Limitations of the Arthur D. Little Model
IRS and Other Reviewers Have Identified a Number of Limitations
To measure the paperwork dimension of compliance burden, IRS sponsored a study in 1984 that has been the basis of its burden estimation methodology since that time. Arthur D. Little, Inc. (ADL), an IRS contractor, released the results of the paperwork burden study in 1988. Since then, IRS and other reviewers of ADL's paperwork burden estimation model have criticized it for number of reasons.1 The reported limitations of the model and its estimates can be categorized into four areas:
- the age of the underlying survey data,
- the exclusion of certain components of burden,
- the model's simplistic treatment of the determinants of burden, and
- the questionable statistical validity and poor documentation of the estimates.
Underlying Data Are Outdated
Several reviewers of the ADL model, including IRS, have criticized the age of the burden model's survey data. They have observed that the survey data reflect 1983 information and lack relevance to today's tax environment because of the many significant changes in tax law and tax preparation technologies that have taken place since then.
Reviewers have also expressed concern over the accuracy of the burden estimates taxpayers provided when they were surveyed. To obtain the information about burden, ADL used two collection methods—a mail and a diary study. The burden estimates yielded by the two methods varied significantly. On average, diary respondents' estimated burden, by return, was 8.32 hours, while mail survey respondents' estimated burden was 14.82 hours—78 percent higher. ADL could not determine which estimate was more accurate, so it decided to use the average of the two estimates.2
Certain Components of Burden Are Excluded
Past reviewers have noted that the definition of burden used in the ADL model excludes important components of burden. The ADL model does includes the time costs (burden hours) imposed by information collections but excludes costs associated with tax planning and postfiling activities, such as preparing for an audit. It also excludes most monetary expenses. For example, paid preparer fees are converted into an equivalent time amount, but expenditures on books, software, and delivery services are excluded.
The Determinants of Burden Are Simplistically Incorporated
The ADL model has been criticized for the simplistic nature of the equations it uses to represent the relationship between burden and its determinants. In its report, ADL acknowledged the simplicity of its equations but explained that IRS decided it would be operationally infeasible to use more detailed and precise models.
One past reviewer noted that the only determinants of burden used in the final model were measures of return size (numbers of forms and attachments), form size (number of words or number of line items), the number of references to the tax code in forms and instructions, and the number of line items requiring records.3 As a consequence, many important determinants were omitted from the model. For example, the model does not allow for alternative filing methods, such as electronic filing software programs, and it also does not differentiate levels of burden between simple and complex types of forms. The model does not differentiate burden between simple and complex line items on a form, and it does not separate burden within the form and identify parts of the form that represent the greatest burden. In some cases the model erroneously estimates the impact of efforts to simplify forms, instructions, or procedures. For instance, if new lines are added to a form's worksheet to simplify computations, the ADL model reports an increase in burden.
The Statistical Validity of the Model Has Been Questioned
Reviewers have also called into question the statistical validity of the model. IRS indicates that errors were made in the sample weighting techniques. In addition, the model's methodology was poorly documented. IRS noted that the ADL burden estimates are inconsistent because they yield results that assign unrealistically high levels of burden to certain forms (e.g., Form 4789, Currency Transaction Report, and Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business). At the same time, IRS noted that the ADL burden estimates for many other forms did not include the amount of time taken to mail them, even though those forms had to be mailed to IRS. Researchers have also questioned the validity of the business burden estimates because the ADL model yields an estimate of burden greater than that found in the survey data on which the model is based.
- IRS, "Report of the Taxpayer Burden Study Group: Roadmap for a New Measure and Pilot Study for Individual Non-Business Taxpayers," Request for Proposal (Aug. 19, 1998); Henry Beale, Report on Arthur D. Little Taxpayer Compliance Burden Model, untitled draft report submitted to the Analysis and Studies Division, IRS (1996); Marsha Blumenthal, Burden Reduction Research and Analysis, Report submitted to the Analysis and Studies Division, IRS (May 1996); PricewaterhouseCoopers, Compliance Burden Literature Review, draft report submitted to IRS (June 16, 1999).
- ADL made this correction by multiplying the burden estimates that would have been obtained if it had relied exclusively on the mail survey results by 0.78. The corrected estimate equals the average of the two estimates that would have been obtained by using the diary results and the mail survey results separately.
- Beale, Report on Arthur D. Little Taxpayer Compliance Burden Model.
LOL! You really are a whole Laural and Hardy cartoon all by yourself aren't you!
The entrenched bureaucrats at IRS and GAO along with the William Gale types at Brookings, the VERY same people the writer is critical of BTW, have debunked it and YOU buy that hook, line, and sinker!
Keep it up my friend! It's a laugh a minute!
BTW: There is no longer any doubt, in my mind at least, that YOU are employed by the IRS!