AS LAWMAKERS BATTLE OVER TAX CUTS, MOST AMERICANS ARE SKEPTICAL AND EXPECT LITTLE RELIEF, SURVEY FINDS; 70% Have Negative Feelings About Tax Preparation, 1 in 3 Feel Sick, Disgusted, Angry or Upset; 63% Unaware of Tax-Free Status of Municipal Bond Interest.

ARMONK, N.Y.--(BUSINESS WIRE)--April 5, 1995--As federal and state legislators fight over the issue of income tax cuts, one thing seems abundantly clear: the American people are skeptical. In fact, according to a new national survey of 2,000 taxpayers, most don't expect to see either immediate or long-term relief from their tax burdens. Even those who expect a tax reduction say it wont be much. Moreover, more than two-thirds have negative feelings about their tax preparation. The survey was commissioned by MBIA Insurance Corporation, the nations leading insurer of municipal bonds.

Sixty-three percent of respondents say its unlikely that a Republican-controlled Congress will lower their federal income taxes over the next five years, compared with 34% who think it will. Asked to consider their total federal, state and local tax obligation, a large majority (79%) don't believe their 1995 taxes will be lower than in 1994. Of those expecting a reduction, 27% say it would only provide enough funds to buy a color television set -- while 11% say they could buy a postage stamp and 3% a soft drink.

On the local level, 75% of those surveyed say that it is unlikely that their state legislatures will pass laws under consideration this year to lower income taxes. Expectations varied widely. In New Jersey, 62% of respondents expect Gov. Christine

Todd Whitman to provide a second consecutive year of income tax cuts. In New York, 66% consider it unlikely that Gov. George Pataki can deliver on his promise of lower taxes. Tax cuts are also considered unlikely in Missouri (94%), Massachusetts (77%) and California (69%).

Tax-Free Municipal Bonds Not Well Understood

The survey found a substantial lack of understanding about the tax-saving benefits of some investments. Sixty-three percent of respondents, for example, didnt know that interest from municipal bonds is free from federal income tax.

With so many people unhappy and frustrated, it was surprising to see the lack of knowledge about ways to lower their tax burden, said James E. Malling, executive vice president of MBIA. It is clear that the investment community needs to do a better job of educating taxpayers about the after-tax benefits of municipal bonds.

If youre in the 28% tax bracket, a municipal bond yielding 6% is worth the same as a taxable investment paying 8.3%. In the top 39.6% bracket, thats the same as a 9.9% taxable yield, he added.

In other questions about investments, 56% were unaware that bank CDs offer lower after-tax yields than municipal bonds of comparable term, and 46% didnt know that municipal bonds can be insured. Respondents were most knowledgeable about taxation of bank CDs -- 76% knew the interest is subject to federal income taxes.

Taxpayer Passions

When respondents were asked how they felt about preparing and paying taxes, negative responses outnumbered positive ones 70% to 17%. Among unhappy taxpayers, 8% describe themselves as angry, 15% upset, 12% anxious or confused, and 14% sickened or disgusted. Six percent say they felt cheated by the government. On the other hand, 0.4% of respondents say they dont file returns and another 1.3% say taxes arouse no feelings. Five percent say paying taxes makes them proud to be Americans and to fulfill their civic duty -- and 0.8% say the process makes them feel good or happy.

Respondents also offered opinions on how to make U.S. income taxes more equitable. Nearly 12% suggest a single tax rate for everyone, followed by 11% favoring replacement of income taxes by a flat or consumption tax. Another 6% call for more taxes on the rich. Surprisingly, only 7% mention lowering taxes, and only 4% of respondents suggest reducing government spending as a way to increase fairness. A reduction in capital gains taxes barely registered with 1%.

The bankruptcy of Orange County, Calif., has not significantly altered people's opinion about the safety of investments made by their local municipality. Of those surveyed, 40% say they are not at all affected and 28% say they are more concerned.

The survey was conducted by ICR Survey Research Group of Media, Pa., which questioned more than 2,000 respondents by telephone in the last week of March. The national survey included 14 states where local legislators are considering proposals to reduce income taxes.

MBIA Inc., through its wholly owned subsidiary, MBIA Insurance Corporation, is the leading insurer of municipal bonds, including new issues and bonds traded in the secondary market. The company also guarantees asset-backed transactions and high-quality obligations offered by qualified financial institutions. MBIA is also a leading provider of investment management services to the public sector. MBIA Insurance Corporation has a claims-paying rating of Triple-A from Moody's Investors Service, Inc. and Standard & Poor's Ratings Group.

CONTACT: Michael C. Ballinger (MBIA)

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Bob Reed (Brouillard Communications)

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