The flat tax proposed by Rep. Dick Armey (R-Texas) and Sen. Richard Shelby (R-Ala.) includes a number of changes that would affect housing values. When the effects of the various tax changes are considered together, if a flat tax proposal similar to the Armey-Shelby bill should become law:

• Homes currently valued at $100,000 or below likely would increase in value an average of 11 percent, due entirely to an expected decline in mortgage interest rates.

• Homes in the $200,000 range likely would change little or not at all in value, with the effects on owners of a decline in mortgage rates and the elimination of anticipated future capital gains tax about equal to the negative effect of the loss of property tax and mortgage interest deductions.

• Homes currently valued at $300,000 and above likely would decline in value by about 7 percent, as the capital gains tax relief to owners would only partially offset the loss of deductions for home mortgage interest and property tax.

On average, the value of the nation's total housing stock would be unaffected by the adoption of a flat tax.

Source: J.D. Foster, "The Flat Tax and Housing Values," Special Report No. 59, May 1996, Tax Foundation, 1250 H Street, NW, Suite 750, Washington, DC 20005, (202) 783-2760.