I like Cain's idea of a relatively flat tax *but* he screws it up with the no taxes on investment income part and his not slaying some sacred cow deductions. Income is income. He could easily fix his fix by leaving that part out and he could throw a bone to progressives by making the income tax part only kick in on income above $10,000 or something.
I'd prefer dividend income to be untaxed, but only if you fixed the corporate tax code so Exxon and company actually pay taxes. The argument against taxing dividends is that it is doubly taxed income, once at the corporate level, and once at the personal level. Corporate tax rates being 40%, that means that on average, if fully taxed at the personal level as well, for a dollar of earned profit, about 68% of that would be going to the government. That's bad.
The problem is that since the big companies, particularly those with international operations, can essentially make billions in profits, yet pay single digit, or no, income tax. Then when you give special treatment to dividends for personal income, you get a very low tax rate.
Again, this screws smaller companies (and their investors) that can't take advantage of the same tax loopholes.
Long term capital gains, IMO, should not be taxed unless they are withdrawn. I see no reason why if I buy IBM at $10, then 5 years later decide to move my money into GOOG, so I sell out at $20, that I should have to pay taxes on the $10 of profit. Treat it like a 1035 exchange in real estate.
Again, an issue where the upper class can avoid taxes. There are many ways for them to take a large stock holding (usually $1MM+) and exchange it into another security (or basket) and pay no taxes. (Exchange funds being the easiest method). The middle class gets screwed again.
The "x% of people don't pay FIT!" (often stated as "don't pay taxes!") is a sham argument because many if not most of those people end up paying a higher % of their income in **total taxes** than people on the upper end.
While I agree that they have a tax burden, since most of those taxes they pay are at the state or local level, it really is irrelevant to the issue of our national debt and national solvency.