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BACK BY UNPOPULAR DEMAND -- APRIL 15TH

 NEW YORK, April 12 /PRNewswire/ -- James J. Cooner, senior vice president, and manager of Tax Exempt Bond Division of the Bank of New York today issued the following:
 It's that time of year again. April 15th, the day of reckoning with the Internal Revenue Service. If you thought the tax burden was heavy this year, wait until next year when rates go up. Current proposals call for increasing marginal tax brackets for federal taxes from 31 percent to 36 percent. On top of that there will be a 10 percent surcharge for incomes exceeding $250,000. This adds up to a 27 percent increase in the marginal tax rate.
 With a federal tax bracket nudging 40 percent -- plus additions for state and local taxes -- the pressure will be on for investors to protect income from the tax gatherers. The one readily obtainable alternative is municipal bonds. Municipal bonds, with their tax-exempt income flow, represent the only way investors can gather current tax-free income.
 Here's an example of how dramatic the numbers can be. Let's assume an investor obtains 5.25 percent from a municipal bond. On the surface 5.25 percent is not a terribly exciting number. However, subject to a 39.6 percent federal marginal tax rate, 5.25 percent equals 8.69 percent taxable equivalent. Furthermore, changes in medicare taxes and the phaseout of itemized deductions result in an actual marginal federal rate of 42.24 percent for incomes in excess of $250,000. Taking these factors into account, our 5.25 percent municipal bond now is yielded the equivalent of 9.09 percent before tax.
 Many investors will find state and local tax burdens added to their federal tax liabilities. Let's take New York State for example. New York State's highest tax bracket is 7.875 percent. Taking into account the deductibility of state taxes on a federal tax return, New York State's tax burden adds an effective rate of approximately 4.5 percent to the overall tax picture. The bottom line now is an overall marginal tax bracket of nearly 46.75 percent, a number that is getting awfully, awfully close to 50 percent. With a 46.75 percent marginal tax bracket, our 5.25 percent municipal bond is the equivalent of 9.85 percent before tax.
 5.25 percent returns are available from quality investments in the tax exempt bond area, whereas returns of 9.85 percent in the taxable bond area would require a severe compromise with bond quality. The quality of a taxable bond yielding 9.85 percent would be in the "junk bond" category.
 Since we are at the low end of the interest rate cycle, many investors are hesitant to invest in municipal bonds today. Their experience in the late 1970's when interest rates spiked upwards still lives in their memory. But investors should realize that investments in municipal bonds need not be only in long term bonds. Consider investing in bonds with an intermediate maturity. For example, municipal bonds with maturities around ten years with an "A" rating are yielding approximately 5.50 percent. The income on these bonds will give the holder approximately 90 percent of the income that could be obtained from investing in 30 year bonds where the interest rate risk is much greater.
 Forthcoming major municipal bond issues which will represent good value to the investor include the following:
 -- $120,000,000 New Jersey Highway Authority (Garden State Parkway)
 -- $300,000,000 Atlanta Georgia (Water and Sewer Revenue Bonds)
 -- $88,000,000 Triborough Bridge and Tunnel Authority
 We all know the importance of acting today to reduce future tax liabilities. Given what's happening in Washington, sheltering income now will make for a much more comfortable April 15, 1994.
 -0- 4/12/93
 /CONTACT: Steve Bruce or Rick Stockton of the Abernathy MacGregor Group Inc., 212-371-5999, for The Bank of New York/


CO: The Bank of New York ST: New York IN: FIN SU:

TS -- NY034 -- 4712 04/12/93 11:00 EDT
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Date:Apr 12, 1993
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