Peter G. Peterson, as he cheerfully admits, is not a member of the middle class. He's a rich Republican Wall Street investment banker. But in his crusade against deficits and entitlements, he adroitly poses as a champion of the middle class.
As soon as the U.S. Supreme Court chose George W. Bush as our next president, the stock market fell precipitously. Wall Street analysts who had been loudly insisting on the need for a Bush victory suddenly began to find all kinds of new reasons for the market's problems--poor corporate profits, weak consumer spending, energy price jumps, and high interest rates, among others. All plausible. But few analysts were willing to admit the obvious: Bush's plans to reverse the tight fiscal policies of the Clinton years with big upper-income tax cuts and hugely expensive privatization of Social Security have made Alan Greenspan and the Federal Reserve more reluctant to cut interest rates.
People often talk about how the federal income tax should not push people deeper into poverty. One way to measure how well the system performs in this regard is to look at how much a person or family can earn before income taxes kick in.
Current law's combination of standard deductions, personal exemptions, and credits yields some fairly odd results. This year, for a single person without children, the income tax threshold is $8,275; in other words, a person in this category will not pay income tax on the first $8,275 of wage earnings. For married people without children, the threshold is $12,950, or $6,475 per person--a marriage penalty.
Just before George W. Bush's inauguration, the Clinton administration put out its final projections of budget surpluses over the next decade. According to a news story in The Washington Post, the analysis predicts about $1.6 trillion in surpluses, assuming that Social Security and Medicare surpluses are off limits and that a collection of tax breaks and programs technically due to expire are extended as they have been in the past. The Post warned, "That would not leave enough to cover Bush's tax cut, which with interest costs could drain revenue by more than $1.9 trillion, let alone his other spending plans."
For corporate America, tax sheltering is all the rage these days. Big accounting firms like PricewaterhouseCoopers, investment banks like Merrill Lynch, and a legion of unscrupulous tax advisers are aggressively marketing their services to otherwise "respectable" companies by promising to help them abuse the tax laws with little chance of detection by the IRS.
In 1998 PricewaterhouseCoopers bragged to Forbes magazine that it was promoting some 30 "mass-market" corporate tax shelters, plus specialty items for big firms willing to pay extra. It said that it had hired 40 salespeople to push its corporate shelters.