The Time to Change Academic Research Is Now

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Academic accounting research has a lot to offer the accounting community. Yet, the way accounting research is communicated stifles its potential impact. Accounting research is steeped in analytical terminology and statistical results that are not generally understood outside academia. For many years, internal and external critics of accounting research have called for change. But change has not come.

The business community has been forced to change as a result of corporate scandals. The academic community should follow suit and take an introspective look toward change. Examine how our research could have played a more pivotal role in communicating the impending corporate failures—and perhaps hampering them. If accounting research on earnings behavior, auditor relationships, or agency theories provided any evidence of the imminent corporate failures, then researchers did a woeful job communicating their findings in a manner that would allow anyone to understand them. The relevance of accounting research has to be communicated in a way that goes beyond demonstrating the researcher’s eloquent mastery of scientific methods.

There is no doubt that doctoral programs do an excellent job training candidates to rigorously research questions. However, doctoral programs fail to train candidates to communicate the importance of their findings in a way that benefits a broader readership, a readership beyond the academic community.

Why now? If not now, when? There is a quiet frustration within the academic community about our research. There are those who have the power to change the system but don’t because it benefits them. Others with power to make changes decry the current system but do little to effect change. Small populations of junior faculty and others, like me, yearn for change but are powerless to be the catalytic stimulus to incite change.

Academic research is in the midst of a crisis of relevance. We will continue in that crisis until change comes. To whom the credit belongs for the following adage, I do not know. As researchers in accounting, we are destined to continue in our perilous crisis if we do not hearken to these words: “You will continue to have what you have always had, if you continue to do what you have always done.”

Sandra K. Gates, PhD, CPA
Assistant Professor of Accounting
University of Texas at Tyler
Tyler, Texas

Comparing State Taxes When Making Business Decisions

The article “Comparing State Taxes When Making Business Decisions” (The CPA Journal, March 2008) compares corporate income taxes, gross receipts tax, sales and use tax, and corporate alternative minimum tax (AMT). The article was excellent, but not exhaustive, because in many instances local taxes also play a significant factor.

For example, while California and North Carolina do not have a gross receipts tax, some jurisdictions in these states do. Some have no maximum, or a very high maximum, while others have a low maximum. For example, Los Angeles has a gross receipts tax (with no maximum), while jurisdictions in North Carolina have a gross receipts tax but with a maximum of not more than a few thousand dollars.

Additionally, the article doesn’t mention business personal property tax, which many jurisdictions have. The taxes themselves vary by jurisdiction and can be significant, as can the administrative time involved in completing these tax forms because they require detail of not only owned assets by specific categories, but also of all leased assets. In addition, if there are significant disposals, certain jurisdictions, such as Memphis, Tenn., require the company to “prove” the disposals.

In my opinion, the business personal property tax is the most regressive tax there can be. The property each year is depreciated in value. Therefore, the tax decreases as the assets get older, so buying new assets puts the value in year 1, thereby increasing the tax—a disincentive to purchase new assets.

When comparing sales tax rates (e.g., New York State’s is 4.0%, New Jersey’s is 7.0%, and Texas’s is 6.25%), New Jersey’s is a statewide sales tax and is the full rate (i.e., jurisdictions do not have a separate rate). New York’s effective rate is really more like 8%—the combined rate when adding the statewide rate to the rate for a particular local jurisdiction. Texas’s effective rate is more like 8.25% when adding in the local jurisdiction’s tax rate. So, while at first New Jersey appears to have a lower sales tax rate than New York or Texas, further analysis shows otherwise.

Any business decision needs to be based on economic analysis, of which taxes are only one part, and that includes federal, state, and local taxes.

Nicholas E. Pecora, CPA

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