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Looking at Property Tax
Thanks for your recent focus on state taxes ("Stingers," January). One area that was missed is the increasing local property-tax burden being placed on commercial and industrial owners. In most situations, the taxable value of these assets has decreased at this point of the economic cycle. Many jurisdictions have been reluctant to grant reductions or are moving to redistribute the tax burden back over to business for the benefit of residential owners. Massachusetts and Cook County, Illinois, are two immediate examples. California has two initiatives planned for November that could increase taxes between 50 and 55 percent if passed on business property. Business-property owners may find it beneficial to look into opportunities for relief as well as other state and local actions that will impact their tax liabilities and profitability.
Norman J. Quinn III
Equity Property Tax Group LLC
Vice President, Property Traxation,
Equity office Properties
We agree. In fact, in researching the state tax story, we found that property tax was such a significant share of business taxes that we decided to devote a separate story to it. For our coverage of business-property taxes, see "Poor Move."
Some Things Don't Change
As I read articles about the benefits of the Sarbanes-Oxley Act of 2002, I just have to shake my head. At the root of the collapse of Enron, Tyco, Adelphia, WorldCom, and HealthSouth is the excessive greed of executive management and the fear that the "independent" auditor may lose a golden-calf client ("The Greed Factor," From the Editor, December 2003).
I guess the question we have to ask ourselves is, could something like this happen again in 5 or 10 years with Sarbox in place? I think the answer is yes. The lack of an internal-control environment at these companies was not the culprit—or at least not entirely. The frauds were not caused by midlevel managers circumventing internal controls. They were caused by morally and ethically bankrupt executives and by the failure of the "independent" auditors to do their job. Had the audit function operated as intended, none of these collapses would have occurred.
Management and the independent auditor are the only real-time defenses we have to ensure that public information is complete and accurate. Sarbox, the Public Company Accounting Oversight Board, and so on are all after-the-fact defenses. Do we think for a moment that Lay, Ebbers, Kozlowski, or Rigas would have had a problem signing off on their financials and saying all is well with the control environment? Heck no!
Not until other executive managers and auditors see their peers going to jail will the environment change. Before Sarbox, there were rules and laws in place that could put all of these offenders behind bars. I don't think creating additional legislation and an oversight board is the answer. Swift and severe punishment is.
Jim De Carlo, CPA