April 10, 2015 - Phil Hodgen

W. Edwards Deming knows where the problem lies

The IRS whines mightily about Americans abroad and how they are not filing FBARs or doing all of the other myriad of things that the system requires.

W. Edwards Deming had a thing or two to say about situations like this. In Out of the Crisis (1982), page 315 we find this little gem:

“I should estimate that in my experience most troubles and most possibilities for improvement add up to the proportions something like this: 94% belongs to the system (responsibility of management), 6% special.”

By “special” he means the people within the system (employees) or external factors.

If we apply this logic to the tax system:

  • 94% of the compliance failures can be blamed on the managers of the system itself, and
  • 6% of the compliance failures can be blamed on the humans who are required to follow the system.

This sounds about right. Here I sit with over 30 years of tax law in my brain and I frequently do not know the answers to common, everyday problems. Sometimes there are answers that can only be teased out of the Code, Regulations, and Assorted Administrative Effluvia with difficulty. Other times, there are answers that are so incoherently written as to be useless (authorship by committee for the win, bro!). Other times, there are simply no answers at all.

How about that relief worker caring for orphans in the remote reaches of Indonesia, or that schoolteacher in British Columbia, or that investment advisor in London? How will each of them figure out what the system demands of them?

The IRS continues to pound the 6% — American taxpayers — with bigger and bigger sledgehammers. Yet the 94% — the tax compliance system that the IRS enforces, in all of its glory — continues to grow weeds and become increasingly FUBARed.

That’s just a thought for Friday.

I’m sitting here in a Starbucks remote from my office, preparing for my webinar for noncovered expatriates on 24 April 2015, and becoming increasingly agitated at the batsh*t crazy expatriation tax system and how murky it is for me, even after advising hundreds of people about the process. All I want for this webinar is to give regular people easy answers so they can help themselves. And it’s frequently damn near impossible to do so.

I’m cranky.

Clearly I need to drink less coffee and recite the Serenity Prayer to myself.