IMO, the ONLY reason to tax is to raise the revenues needed to run the government (unless you include such things as protective tarrifs). If you accept that premise, this should be axiomatic: taxes should be imposed in the manner that is most cost-efficient. (Tax evasion is a form of "cost".)
I'd eliminate the system of income taxation we have now -- which is used at local, county and state levels, BTW, not just at the federal level. I'd tax every single human being or entity with income of its own. Yes, I mean churches, too. I would tax every accretion to wealth -- proceeds of life insurance policies, social security income, retirement funds, education funds, municipal bonds.....EVERYTHING.
I don't favor a tax on consumption -- though I see its appeal -- as an alternative to a tax on income. I don't think you can achieve the same level of third party reporting with it, and I don't think you can avoid complexity. For example, what to do with money spent that is the proceeds of a loan, and therefore, not income?
No person or business would pay tax on its gross income.....by definition, gross income is income plus the cost of production or sales. But I don't think allowing this one adjustment is fatal to the simplicity that'd make my system achieve the goals I hope for.
When government wants me to have more kids, or adopt some, or buy energy efficient appliances, or just wants to reward me for drawing breath, IMO, taxation is the LEAST EFFECTIVE and MOST EXPENSIVE manner of getting me motivated to do so. There should be no deduction for mortgage interest; home ownership should be a choice people make without any inducements from the government.
I feel the same way about sin taxes. Don't want me to smoke, drink, etc.? IMO, it'd be far better to offer me smoking cessation aids....and government wouldn't be so dependent on my continuing to smoke.
I don't agree with Fluffy about taxing food stamps, etc. I get his point, but it is very costly to do what he's suggesting....and COST EFFECTIVE taxation is my goal.