Treasury security index yields as the taxable security benchmark for estimating implicit tax rates.
where [YTM.sub.nontax,i] is the yield-to-maturity for tax-exempt SALG bond issue i and [YTM.sub.tax,i] is the yield-to-maturity for the benchmark taxable security (matched by maturity).
On a risk-adjusted basis, any comparable-maturity bank-qualified municipal or
taxable security will provide a higher after-tax yield.
Consider this: Anyone in the 36% bracket can earn the same after-tax income from an AA-rated, tax-free bond yielding 5.5% as from a
taxable security yielding 8.57%.
Of two proposals now making the rounds on how to handle the pension fund-infrastructure program-setting up a quasi-governmental corporation or creating a
taxable security with a dedicated money stream--I favor the latter.
Someone in the 31% tax-bracket can earn the same after-tax income from a muni yielding 5.7% as they would from a
taxable security yielding 7.6%.