or the fiscal year ending June 30, 1993. In other words, they were nearly 18 moths out of date (Tarik 50)So in a flat tax world, why bother with municipal bonds, with all their attendant difficulties, even if they are AAA-rated? It would be much easier to buy a Treasury bond with a similar yield. Like in-state municipals, most tax reform treasuries would still pay interest exempt from state and local taxation. Inevitably, municipals would have to offer richer yields than Uncle Sam. That means that issuers of new municipal bonds would have to pay higher interest rates too. Up would go the cost of public works. Local officials would have to abandon municipal projects. (Tarik 51)The proponents of the flat tax have a perspective unlike its opponents. The Flat Tax was crafted by two Stanford University taxation experts, Robert E. Hall and Alvin Rabushka. First published in 1985 and updated in 1995, their model would tax the wages, salaries, and pensions of individuals that exceed such basic exemptions of $9,500 for a single taxpayer. Basic exemptions would vary with the size and composition of the household. There would be no further deductions. Investment income from capital gains, interest, and dividends would be exempt. Businesses would deduct necessary goods and services, wages and benefits, and investment purchases from gross revenue. There would be no deductions for dividend or interest payments. The flat rate would be 19 percent, which the authors calculate would be sufficient to avoid an increase in the federal deficit. The tax burden on lower and higher income Americans would decline. (Flanegan 34) The flat tax should be simple.The flat tax proposal that has attracted the most notice so far is the one that Richard Armey introduced in Congress. This version of the flat tax would apply a uniform tax rate beginning at 20 percent and falling to 17 percent two years following its passage as a law. It will apply to all business income and...
