Thursday, July 28, 2016

Some questions for Professor Benjamin H. Barton about his use of IRS data to estimate solo practitioner incomes (Michael Simkovic)

After Tuesday's post explaining why IRS schedule C data dramatically underestimates incomes for solo practitioners and other sole proprietors, Professor Benjamin H. Barton emailed to indicate that his views remained unchanged and he did not intend to respond beyond his previous comments on Professor Stephen Diamond's blog.  Barton's comments did not address many of the issues I raised. 

On Wednesday, I asked Professor Barton to consider the following questions:

1) Do you think that 20 million or so U.S. small business owners are living below the poverty threshold for a 2 person household?

2) Do you think the IRS is wrong about its own data and schedule C does not in fact understate net income?  Why do you think that you understand IRS data, IRS enforcement capabilities, and the level of tax evasion better than the IRS?

3) Do you think that everyone who files schedule C has no other sources of income?

4) Do you think that Treasury and JCT estimates of tax expenditures are way off and exclusions and deductions from tax concepts of income are negligible?

5) If apples to apples comparisons using schedule C data show that legal services sole proprietorships are more profitable than 97 percent of sole proprietorships, is that something you should mention?  Would you at least agree that using schedule C data for legal services and census data for everyone else is a methodological error?

Professor Barton has not yet responded.

UPDATE:

Aug. 11, 2016. Professor Barton responded without specifically answering the questions above, but generally conceded that IRS data is problematic.

Aug. 15, 2016.  I replied to Barton.

http://leiterlawschool.typepad.com/leiter/2016/07/some-questions-for-professor-benjamin-h-barton-about-his-use-of-irs-data-to-estimate-solo-practition.html

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