Practice and policy insights from academic tax research.

• Author: Nellen, Annette

In the continued spirit of bridging the gap between tax academics and tax practitioners, for the third year in a row, this column features examples of published academic tax research (see Meade, "Campus to Clients: Academic Research for Your Practice Consideration," 52 The Tax Adviser 526 (August 2021), and Meade, "Campus to Clients: Practitioners Can Benefit From Academic Tax Research," 51 The Tax Adviser 532 (August 2020)). The papers were selected by the External Relations Committee of the American Taxation Association (ATA) with the aim of sharing research that is relevant and of interest to practitioners. The ATA is the leading organization of tax academics, and the External Relations Committee aims to connect with tax professionals.

The five articles selected for this column highlight the wide breadth of topics and methodologies found in academic tax literature. Topics within academic tax literature that may be of interest to practitioners include tax policy, corporate and individual taxpayer behavior, effects of tax on stakeholders, tax accounting issues, and tax data analysis. Researchers provide valuable guidance on tax policy by providing insight on potential policy changes as well as feedback on existing policy.

Many academic tax papers examine corporate behavior using publicly available data such as annual reports, stock prices, rankings, and other sources of information. Studies of individual taxpayers are also common, with researchers conducting experiments or developing creative uses of public data. Federal, state, and international tax issues are often examined, as well as the impact of nontax developments on tax policy and behavior.

As with most academic research, these five articles were subject to a rigorous development and review process as outlined in the earlier columns. Researchers generally get input from peers on their "working paper" by presenting their thesis, approach, and initial findings at campus forums and conferences such as those sponsored by the American Accounting Association (AAA). Most articles undergo thorough blind peer review. Reviewers often call for some revisions, such as for clarification or deeper analysis, for the paper to be accepted for publication. The academic publishing world is often harsh, as many papers are rejected under these rigorous standards for research approach, content, novelty, and timeliness.

Of the articles summarized here, one was in a tax-specific journal, while the others come from broader accounting journals, including one focused on accounting history.

'The Effects of Income Tax Timing on Retirement Investment Decisions'

Withdrawals from a tax-deferred (i.e., traditional) individual retirement account (IRA) or 401(k) are taxable, making the account's after-tax value less than the nominal value appearing on a quarterly or annual account statement. This future tax liability's salience is weak for most individuals, which may cause them to overestimate their after-tax retirement savings. Roth IRA accounts are not affected in this way because withdrawals from them generally are tax-free.

In their article published in the March 2021 issue of The Accounting Review (Vol. 96, Issue 2), Shane Stinson, Marcus Doxey, and Timothy Rupert hypothesize that individuals' inclination to overestimate a tax-deferred account's after-tax value may cause them to believe that it will be easier to meet their future cash flow needs than is the case. Such an individual therefore may see less of a need to generate a higher return than does an individual holding a Roth account with the same after-tax value, so investments held in...