By now we have all heard Greenspan himself thinks that a national sales tax may be the way to go. I am not necessarily opposed to that idea. Let's see if we can use it to our advantage.
We'd have to insist than any plan pays off the national debt in 20(?) years, maintain progressiveness, and SocSec & Medicare would be set aside in a lock box, with caps eliminated, gradual increase in the retirement age (we're living longer, so we can work longer), and subjecting the taxes to all classes of income as well. And pay as you go rules would be restored as well.
Proposing a national sales tax of 7.5%, in exchange, increase exemptions in the personal income tax to 20k for a single person/40k for married couples, and 10k for each dependent, with a flat tax over that amount of say 30%. No further deductions. No need for those rich people to hire accountants that get them out of paying taxes that Bush likes to talk about. All classes of income treated the same. And, low income families would be eligible for refundable credits.
I'd even throw in eliminating the double taxation of dividends by allowing corporations to deduct them, and have a flat corporate tax rate of 30%.
Under this scenario, a married couple earning 50k would end up paying 12.5% total in sales tax/income tax. A married couple making 200k would pay 27.5%, and a married couple making 1mil would pay 31.5%.
Now, this assumes all income is spent and pays the sales tax. Under this proposal, those in the higher incomes would have to 'not spend' 80% of their income to end up paying around 12.5% total in federal sales/income tax.
As for the low income families, say a married couple makes 25k, under this plan, they would be eligible for a refundable credit of $4500 (25k - 40k = -15k * 30%) offsetting the $1875 (25k * 7.5%) sales tax they paid spending all of their income.
I think something like this could work, and I think there can be bipartisan support for it. It is simpler. It maintains progressivity. It will encourage savings (although, this arguement go against consumer spending driving/expanding the economy). End special interests in the tax code. Treat work equal to 'non-work'.
Just kind of throwing things out there.