WASHINGTON -- If there is such as thing as a good omen, the newly introduced tax simplification legislation is certainly one.

Just when many in the municipal market were resigned to a measure expected to contain few, if any, changes in the municipal bond area, the simplification measure introduced 10 days ago by Ways and Means Chairman Dan Rostenkowski, D-Ill., turned out to be surprisingly generous.

Although the bill contains only a fraction of the bond proposals the market wanted, it still offers three major items that would go a long way toward easing some of the bond curbs that have made life difficult since 1986.

Those include increasing the small-issuer exemption from the arbitrage rebate requirement to $10 million from $5 million; eliminating overlapping arbitrage and yield restriction requirements; and repealing the requirement that no more than 5% of a bond issue go toward "disproportionate and unrelated" uses.

Rep. Rostenkowski's bill, plus a companion simplification measure introduced jointly by Senate Finance Committee Chairman Lloyd Bentsen, D-Tex., and Rep. Rostenkowski that includes several small provisions that would aid tax-exempt bonds, represents a golden opportunity to start making needed changes in some of the bond curbs.

How many changes can be made this year will depend upon whether Congress drafts a general tax bill this fall that raises new revenues.

If the deficit becomes a problem again and a tax bill is needed, the market will have chance to lobby Congress to use some of that revenue to pay for including some of the other major bond simplication proposals that have been suggested by Rep. Beryl Anthony, D-Ark., such as increasing the $10 million small-issuer exemption from the curbs on bank deductibility and allowing issuers that must rebate arbitrage profits to retain 10% of the money.

As it stands now, however, neither the Bush administration nor Congress has a general tax bill on its agenda, and it is very unlikely one will be drafted.

If so, obtaining any bond provisions besides those in the simplication bills will be impossible.

But the market should not be disappointed. It should push as strongly as it can to lobby Congress to approve the modest simplification proposals that have been introduced and resist any attempts to load the measures with Christmas tree provisions that could doom them for this year.

The legislation introduced by the two tax panel chairman offers the best opportunity the municipal market has had in five years to start freeing itself from some of the 1986 bond curbs.

The market should take what it can get now and then push for further easing next year.

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