Curmudgeon’s Law of Numerical Fiction

Regular readers of Bad Money Advice will not be surprised to hear that I prefer numbers to words. (Allegations that I prefer computers to people, however, are greatly exaggerated.) I think this is a natural inclination. Any halfway thoughtful Old Calculator - Roberta F person favors evidence over feeling, and numbers have the appearance of being hard facts.

But not all published numbers are factual, even when widely repeated in respectable places. Which presents a difficulty for us lovers of digits. How can we separate the real from the realish? Not to worry, because today I am revealing for the first time my Law of Numerical Fiction which will help identify the imposters.

To be successful, that is, repeated widely as if it were true, a fake number must satisfy three criteria.

1. The number reinforces previously held beliefs. A number that runs against the grain for much of its audience isn’t going to get far. Moreover, the number must fit into the world view of the person spreading it so well that it would never occur to this person to check up on it.  That person may have an explicit agenda, e.g. Lifelock, or may just think it meshes well with a larger story they want to tell, e.g. the many people who repeated Newsweek’s beauty numbers.

2. The number is remarkably extreme, but not ridiculous. In order to get spread, the number must be newsworthy, taking a preconceived notion another step or two, but not so far that people start questioning it. If I tell you my 11 year old daughter is now 5 feet tall, you will just smile politely and say “Good for her.” If I tell you she is 6 feet tall you will express surprise and tell all your friends about this guy you know with a six foot tall sixth grader. But if I tell you she is 7 feet tall you will just smile politely and say “Good for her.”

3. There is no organized [and credible] group that opposes the number. A fake number that gores somebody’s ox will not last long in the media buzz before the ox owner speaks up. Say that healthcare is expensive because the average American doctor makes $1 million a year and the AMA will be all over you like a cheap suit. But if the number doesn’t conflict with anybody’s agenda it can go blissfully unchallenged. Lifelock can claim that identity theft is as common as mosquito bites and nobody says a thing. (Cranky bloggers don’t count.) It is not as if the National Association of Identity Thieves will put out a press release to set the record straight.

Spotting false numbers that satisfy these three tests is not hard. Several examples have been mentioned in this blog in the past. And I’ll give a new one today.

Nina Olson, the National Taxpayer Advocate, in her latest annual report to Congress, tells us that:

IRS data show that taxpayers and businesses spend 7.6 billion hours a year complying with tax-filing requirements. To place this in context, it would require 3.8 million full-time employees to work 7.6 billion hours.

Her “context” is exactly the sort of sanity-check calculation that might lead a skeptic to question the original number. There are about 140 million employed workers in the US, so 3.8 million full time employees just filing tax returns implies about 2.7% of the workforce (1 in 37) is employed in this manner. And just to be clear, this is time spent only on the IRS income tax forms, not complying with any other kind of tax nor dealing with audits, etc.

Where does the number come from? The IRS maintains estimates of how long it takes, on average, to fill out each form. Olson’s office multiplied each estimate by the number of each form filed, and presto, 7.6 billion hours. Helpfully, she provides a table with the details.

And if you examine the list of estimated times for the forms on that table you quickly realize that the number is hopelessly exaggerated. Filling out and filing the old familiar 1040 allegedly took 134 million taxpayers an average of 26.4 hours each. That number includes filers of the 1040A and 1040EZ. And the 60% of Americans who hired somebody to help them.

Even the simple W-2 form is apparently burdensome. The 243 million of those produced by employers in a year take an average of 30 minutes each to  prepare. In any modestly organized business the W-2 is a trivial side-effect of the payroll system. If I was running a company and I found out it was taking 30 minutes per W-2 I’d start firing bookkeepers. Heck, I’d probably call a meeting and yell at some people if I found out it was taking 30 seconds.

The 7.6 billion figure satisfies all three criteria of the law. That dealing with our absurdly complex tax regime takes a lot of our time is certainly a widely held belief. 7.6 billion is newsworthy big, but not implausible. And nobody is about to come to the defense of the tax code.

That last bit may surprise some. Surely the IRS has an agenda to minimize the perception of a burdensome tax regime? No, not really. As annoying as you find filling out all those forms every April, imagine how you would feel as a modestly paid bureaucrat who has to enforce, and explain, a tax code now at 3.7 million words, up from 1.4 million in 2001. From the IRS point of view, this is a big mess dumped on them by Congress.

And, of course, each and every member of Congress will loudly bemoan the state of the tax system while heroically defending the little bit of complexity that they personally added.

Calling attention to numbers, widely taken as fact, that aren’t fact, is important. Many of the personal financial decisions we make are based on numbers we hear from sources we assume are reliable.

Because I think it is important, and because it amuses me, I am starting a new feature here on BMA, “That Can’t Be Right” in which you, the reader, send in candidate false numbers and I, the blogger, dissect and mock them. Send them in to frank at badmoneyadvice dot com. Ideally, the number would be widely disseminated, widely believed, and, after modest examination, clearly bogus.

[Photo: Roberta F.]

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