The implicit tax on tax-exempt municipal bonds is currently very low, indicating that the tax system is not in good shape. This low implicit tax suggests that the tax system is not effectively delivering tax subsidies and is not reaching its best sources. To improve the tax system, the U.S. needs to focus on repairing the tax base through a major tax overhaul similar to the Tax Reform Act of 1986. Investors are avoiding tax through alternative methods, leading to the low implicit tax on municipal bonds.