The campaign for the 1996 Republican presidential election focused attention on proposals to replace the current federal income tax system with a flat tax. This booklet examines the ramifications of a flat tax for local school funding. Section 1 outlines the criteria for evaluating proposed taxes and the purposes of tax systems. The second section offers a brief history of federal income taxes, explains the current federal income tax and criticisms of it, and outlines four alternatives to the federal income tax system. The third section evaluates three flat-tax proposals: the Hall and Rabushka proposal, the Armey-Shelby proposal, and the Forbes proposal. The booklet next reviews arguments for and against the flat tax and examines implications of the flat tax for school finance. The flat tax would have a direct impact on federal funds that schools now receive. The flat tax would have less obvious effects on state revenue, school district bonds, property tax increases, interest rates and property values, attitudes toward home ownership, local school foundations, and investment in human capital. For example, if all investments in schooling are given the same tax treatment as investments in physical capital, private schools could become much more attractive because tuition payments could immediately be written off as an investment. One table is included. (Contains 14 references.) (LMI)