The DQYDJ Weekender, 5/18/2013

August 22nd, 2020 by 
Picture of a Casio calculator

Math! (Boring. Actually, I use OpenOffice)

Yesterday, Nate Silver posted an article as a 'pre-buttal' to the inevitable complaints of conservatives audited in the last few years (yes, many conservatives and liberals will be randomly chosen per year).  Turns out, a number of prominent conservative donors - some prominent only because they appeared in Democratic campaign material (in one example, directly from the President's campaign!).  Coincidentally, or not, some of those conservatives ran into some major hassles from government agencies.

Let's talk about one of those cases - the case of a large Mitt Romney donor, Frank VanderSloot.

VanderSloot donated $1,000,000 to Romney aligned groups, earning him the dubious honor of showing up in some late April 2012 campaign material from President Obama's reelection campaign.  I'll let Kim Strassel of the WSJ tell you the rest:

Twelve days later, a man working for a political opposition-research firm called an Idaho courthouse for Mr. VanderSloot's divorce records. In June, the IRS informed Mr. VanderSloot and his wife of an audit of two years of their taxes. In July, the Department of Labor informed him of an audit of the guest workers on his Idaho cattle ranch. In September, the IRS informed him of a second audit, of one of his businesses.

Now, Nate Silver said we can't be sure any conservatives were targeted by the IRS since the audit rate on people with incomes over $1,000,000 is 12% (let's ignore the oppo research action - but yes, that's messed up).  Great hand-wavey explanation, but unless you assume in Mr. VanderSloot's case that all of these events were related the math is way different than Silver implies.  I think it's a fair assumption that the IRS and the Department of Labor won't coordinate too - a spokesman for the IRS even says it in this article about the case.

Here's the math if these events were unrelated:

12% chance of a personal audit (from IRS data) x  17.8% chance of a large company audit (I'm assuming Malaeuca is the company targeted) x .39356%* = .0084% chance of VanderSloot's woes, assuming everything is random.

How we describe our population is tricky... not all our $1,000,000 earners will have a large business with over $500,000,000 in revenues (although some will).  Let's generously assume they all do - so 337,477 millionaire tax returns times a .0084064416% chance of the triple audit.  So that's low - but I'm being generous here.

So, yes, using my quick math  - I estimate around 28.4 returns a year will have the triple threat of audits from the IRS, the IRS and the Department of Labor.

Now, these next factors had no bearing on a fair odds calculation - but they lend credence to a political motive... How many of those end up with no enforcement action (VanderSloot claims that the IRS owed him after the audits!)?  How many involve donors specifically called out by a Presidential candidate?

Look - I think it's disgusting when public figures with immense power "punch down", so to speak.   I don't have time right now for a privacy dissertation, but I don't think large donations to a politician should inspire the opposition to publicize names of donors... not public figures... to millions of followers.  Respond in kind - but yes, we know it's easy to escalate if you're a President or a Comedian or a Radio Host or a (insert person with followers here).

*My math on Department of Labor Enforcement: I'm being generous here since I'm including all actions to emulate audits (EBSA Plan Administration, OFCCP Evaluations, OFCCP Investigations, and WHD Cases - basically, I'm only un-checking inspections), but I count 39,356 enforcement actions in 2011-2012 on roughly 10 million employers covered.  Yeah, it's not evenly distributed - you might have an audit with some follow up (resulting in multiple events), but it's fair to say your odds of a single year audit from the DOL are around .4%

Links We Liked!

  • Who knew?  Energy levels might dictate our 1 dimension of time and 3 dimensions of space.  In a few billion (trillion?) years we might have another space dimension to play with!
  • How does a high earning female affect males?  Read the abstract (or the full study).  The effects are different if the female is in a relationship or is single.
  • Are we in another bubble, in potentially all asset classes?  Bloomberg doesn't know.  Burbed, on the other hand, has some more great evidence that the Bay Area is getting kinda frothy!
  • Mr. Money Mustache had an interesting article on constant optimization - and a realization that many (most?) people just don't want to change their finances.
  • Cracked hits one out of the part (adult language) with 6 Reasons Good Bands Start to Suck.  I wan never a huge metal fan, but I can dig the argument...  Oh, and if you aren't going to visit?  Just do it for the Bono art.
  • Nelson at Financial Uproar runs a screen to find out which businesses are trading for less than cash... and is going to see if they 'beat the market', so to speak.  According to my co-writer, statistical rigor in the stock market will require around 40 years of trades... so he's in it for the long haul!
  • A $7,000 online Master's Degree from a well-ranked college (Georgia Tech)?  Wow - if this takes off, I might add a few more pieces of paper to my wall!
  • Evan at My Journey to Millions has become a nihilist!  ("Oh, that must be exhausting").  Well, at least with money topics.  I hear you, my friend - it's harder to talk about finance cold than to a receptive audience.
  • Our pal Makin' Sense Babe pulls the mic off a camera (read: it won't work) for a hilarious interview with people on Muscle Beach about what "Don't Fight the Fed" means.  Last time I was there I considered buying one of those Sweatshirts with cut-off arms - because, irony.

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