Throw out the current income tax code.
Treat all income streams to an individual equally. Earned, tips, passive, rent, dividends, business income, capital gains -- it's all the same.
Exactly two deductions are allowed, and these are permitted only to ensure that we are taxing net income rather than gross:
- Other taxes paid
- Costs associated with income sources (e.g. paying the mortgage on the house you're renting out, payroll for your business)
Total the income for a given year.
No tax is paid on any earnings at or below 4x the federal poverty line.
Every dollar above that is taxed at a flat rate. This rate is adjusted as part of the budget process to guarantee a balanced budget.
No more deficits. You want to increase spending, you have to justify it with a rate hike that must be passed in conjunction with the spending bill.