I've long supported the idea of eliminating income tax entirely at all levels and replacing it with a much higher sales tax. Say, 23% federal sales tax with up to an additional 10% permissible by states (current county/city sales taxes are grandfathered in). A system like that would accomplish a few key goals:

 

1. Eliminate income tax fraud, and make it just short of impossible for people to hide from taxes.

2. Encourage fiscal responsibility: buying a $40,000 car will cost you $3,300 more in taxes than a $30,000 car would. That sort of hard number might prompt people to buy within their means rather than taking out a second mortgage on their condo to get a car that they can't afford their payments on anyway.

3. Ensure that people are contributing more or less equally to the tax system. You'll always have the millionaire who buys a Ford Focus, but by and large, people will spend to or slightly above the level that they can afford. The guy making $250,000 per year that buys a Ferrari will pay much more in tax than the guy making $50,000 a year who buys a Camry.

 

It's not a perfect system, but going away from income tax and moving to a sales tax-based system instead would solve a lot of the problems we have now.

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