Focus on consumption not income

Active income, income from one's direct efforts, should be tax free.

Allowing individuals to keep the fruits of their labor, is, on average, a strong motivator to bring the best of our natural and learned talents.

It also lowers the threshold for having a comfortable living because you get to keep all of what you earn.

To pay for common costs (not entitlements) governments should look to a consumption tax.

I like this from Greg Mankiw

'4. Ideally, I would use consumption, rather than income, as the tax base for purposes of raising revenue and redistribution. The benefit of consumption taxes over income taxes is that they do not distort the intertemporal allocation of consumption. A variety of economists have proposed ways to implement a progressive consumption tax. For example, the Hall and Rabushka flat tax is progressive in average tax rates; the Bradford X-tax is similar but even more progressive.'

Consumption allows an individual to ask the basic question of need vs want. If you want something then you should be taxed for it. An individual's reduction in the want category should fund the need taxes.

Also, the alternative to consumption is savings. If you want an ipod, fine, just be prepared to pay a tax. The tax should remind you to save. Savings lowers the cost of capital (supply of money increases, price goes down). Access to cheaper capital can fund new technologies (entrepreneurs with risky ideas can shop for funding from more sources) that lower consumption (green energy, cheaper houses, cheaper health care technologies etc).

Beware of politicians that want to tax hard earned income.