Some here seem to favor the progressive tax system now in place. I favor a flat tax or something similar. I think things would be a lot better if everyone paid some income taxes at a federal level and you could not receive a "refund" for more than you paid into the system. Refund... if line x is greater than line y, enter 0 as your refund. People need to feel that they have skin in the game.
Personally, I'd settle for a non-regressive tax. I've gotten into arguments with people who scream and holler and go nuts when I propose a flat tax, and how our progresive system isn't progressive enough, etc... They get a funny look when I tell them a true flat tax would be more progressive than what we have now, and pull out the examples to prove it.
Personally, I think that a flat tax with a hefty deduction is the way to go. Something like your first $10k is tax free, then 27% or whatever it needs to be. Long term capital gains included, though I might offer the ability to average those across multiple years.
Alternatively, to encourage saving/investing, I'd tax 'earned' and 'unearned' income in parallel. IE you get $10k worth of income deduction from each source tax free each year, then the taxes hit. The $100k-200k of investments to earn that much is a heck of an emergency fund. But people like Buffet, Gates, and Romney end up paying about the same rate no matter how they structure their income, and actually more(higher percentage) than their secretaries.
