The Federal Tax Code is regressive.  Wages, capital gains, dividends, interest income, etc. are not taxed equally,

Illustrative example:
1. If your surname begins with A through B, you will pay income tax at a rate of 15%.
2. If your surname begins with C through Z, you will pay income tax plus an extra 7.65% in FICA (Social Security and Medicare) taxes.  If you are self-employed, you will pay another 7.65% in FICA taxes for a total of 15.3%, however, the extra 7.65% is deductible from your Federal income taxes.

A through B are in love with this system while C through Z think it stinks.

Here is a report on what Warren Buffett, the Oracle of Omaha, had to say about the US tax system on June 28, 2007 (bold  mine):

Warren Buffett, the third-richest man in the world, has criticized the US tax system for allowing him to pay a lower rate than his secretary and his cleaner.

Mr Buffett said that he was taxed at 17.7 percent on the $46 million he made last year (2006), without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 percent … Mr Buffett told his audience that US government policy had accentuated a disparity of wealth that hurt the economy by stifling opportunity and motivation.

One common myth about the United States Federal tax system is that it is progressive.  It is not progressive and will not be until we tax income equally regardless of how it is generated!

Another common myth is that taxes have not been raised under President George W. Bush.  When people argue that taxes have not been increased, they neglect FICA taxes.  In 2001 when President Bush took office, the maximum amount subject to FICA tax was $80,400.   For 2008, the maximum amount is $102,000, a 27% increase.  So taxes have increased on one the most regressive parts of our tax system, FICA taxes.

On October 31 of last year (2007), in an interview with Tom Brokaw, Buffett issued the following challenge regarding tax rates:

I’ll bet a million dollars against any member of the Forbes 400 who challenges– me that the average [tax rate] for the Forbes 400 will be less than the average [tax rate] of their receptionists. So, … I’ll give ’em an 800 number. They can call me. And the million will go to whichever charity the winner– designates.

So far, nobody has accepted the challenge.

We will have a truly progressive income tax system when wages, capital gains, dividends, interest income, etc. are taxed equally, and tax rates are set based only on income.  Income origin must have no relationship to the tax rate.

Next topic:  Why corporate taxes should be raised.