Tax Season Starts Today (Yay?)

It's official, tax season starts today! Where "official" means the IRS is now accepting tax returns. Yay? 

I don't know anybody who really celebrates tax season. Even the accountants who make most of their annual income during tax season look at it with a degree of dread because it means a few months of working nights and weekends.

Likewise I don't know anybody who actually files taxes this early. Even the majority of the working and middle class who expect a refund— ergo, getting it earlier is better— mostly drag their feet on filing. I'm pretty much the only person I know who ever used to file taxes in late January or early February.

Last year I did my taxes on Valentine's Day and filed the return in early March. It's a bit later than I used to file, say, 20 years ago. The difference is that some of the financial statements I need nowadays take longer to be generated. We've actually got our W2s already, along with some other forms. Our 1099s are currently promised mid-February. Maybe they'll arrive a bit early so I can have another fun Valentine's Day!

MBA Students Overestimate Average US Wages

Today I read about an interesting tweet that went viral last week about MBA students overestimating what the average US worker earns:

I asked Wharton students what they thought the average American worker makes per year and 25% of them thought it was over six figures. One of them thought it was $800k. Really not sure what to make of this (The real number is $45k)

— Nina Strohminger (@NinaStrohminger) January 20, 2022

Nina Strohminger is a professor at Wharton, the MBA program of the University of Pennsylvania. Wharton is currently rated as the #2 business school in the US.

"Lies, Damn Lies, and Statistics"

Most of the viral discussion about this tweet has been about how out of touch the MBA students are and why that's actually common— not just for people who tend to come from affluent families but everyone. My immediate thoughts were along those lines, too. But then I realized that before we even get to debating why this is, we need to look at the problems with the statistics. Professor Strohminger has actually done a poor job here. Five Things:

1. Okay, so one-quarter of the students think the number is $100,000+. What about the other 75%? What threshold fits the lowest one-quarter of answers? What was the average?
2. How many students were surveyed? Small sample sizes yield meaningless results.
3. What efforts were taken to ensure the students participating are representative of the class? (Since so much of the viral discussion is about characterizing Wharton students, or MBA students in general, or academic elites in general.) And were they taking it seriously? The person who answered $800,000 was likely ridiculing the question. How many others might have done the same?
4. Did you specify median or mean? These figures are very different.
5. The "correct" answer is also different depending on not just median vs. mean but also full-time vs. part-time work. Many policy experts would argue a better metric is median household income.

Am I Smarter than a Wharton Student?

FWIW my quick answer was $65,000. That's not correct for the exact question the professor asked. Though even her answer seems incorrect. The Social Security Administration reports that last year the mean US wage was $53,383 and the median was $34,612.

My $65k answer comes from thinking about median household income— a better measure than individual income for purposes of many economic policy discussions. I recall looking up the $65k figure when I was writing about US socioeconomics a few years ago, so that's why it was my immediate answer here. On that metric I was actually very close. According to the US Census (2020) it was $67,521 in 2020. It was higher in 2019, at $69,560. Likely it was $65,000 a few years ago.