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Just a random thought: Why not place a higher tax on luxury items? The sort of items that if you are buying them, it means you have too much money. Status symbols. This wouldn't effect those who are struggling just to get by unless they were being financially irresponsible. If I were Queen....
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It's been done before, a luxury tax on yachts. The problem is, nobody particularly needs yachts -- the industry almost went bankrupt because nobody bought yachts at the inflated price.

I'm against sales tax in general, unless there's a particular reason to stem inflation (and there are smarter ways to go about it). But if we're going to tax consumer goods, we need to tax those which consumers aren't going to stop buying -- food, drugs, etc. The problem with that is consumers won't stop buying those goods because they need them, and raising drug prices is damn cruel. Raising food prices, not quite so cruel at the current rate given how cheap food is, but doing so would in turn hurt the restaurant industry (which already has thin profit margins), which would stop expanding, stop hiring, and more people would wind up screwed over. Sales tax just isn't a good idea.

Income tax has many of the same drawbacks -- if we tax too much, for example, people may not buy that yacht -- but it's less specifically harmful to any particular industry, and ensures investment in our economy (as opposed to, say, investment in foreign goods to sell here, increasing our trade defecit). Taxes on the poor and middle-class are fairly useless, given they're already here and are almost guaranteed to invest in this economy -- but taxing the rich ensures that they can still afford an incredibly privileged life in this country while some of their vast profits are drawn off to support roads and education in this country, ensuring perpetuation of an educated, capable workforce to innovate new industries while older ones are sent overseas to countries who can perform them for much cheaper than we can here, which, while it bleeds off jobs from this country, makes consumer goods cheaper for everyone.

The problem with taxing the rich is that they may simply decide to move somewhere else. There's nothing in particular to tie down the extremely wealthy to this country, and if potential benefits outweigh the cost of paying taxes, they'll simply move offshore -- like Halliburton, for example, with headquarters in, I believe, Bermuda. The extremely wealthy and their corporations can escape from paying taxes fairly easily, given how much influence they have in the federal government, which only makes the taxes heavier on the wealthy few that remain in this country.

Which is regrettable, but taxing the rich is still a smarter policy than taxing the middle class. If I give everyone $5, I'm practically guaranteed that money will be spent quickly, often, and domestically. If I give myself $5,000,000, I have no particular reason to invest any of it aside from basic needs like rent or food. And given how large profit margins are when products are made in other countries and sold to our wealthier economy, if I have any sense at all I'll invest in overseas ventures and become even wealthier. This bleeds money from our economy, if it makes other economies wealther -- China, for example, is becoming a ridiculously powerful economic force precisely because they permit a free(esque) market and encourage investment in their country. Most economists I've read predict China will overtake us within the century, if not long before half that.

And, frankly, when that happens, we're rather screwed. War against China isn't an option. Not only for its incredibly powerful air force or nuclear weapons or giant population, but because much of our industrial infrastructure is located in that country. We couldn't go to war against China today, much less fifty years from now -- it would break the leading American corporations' capacity to produce their goods.

In the economic ideal we'd have no taxes, which would ensure a free market and provide incentive to invest in the American market. We'd still need to pay for security and some oversight (or so I believe -- a free market is impossible if we don't have an honest one), but we wouldn't take taxes to pay for education, welfare, social security, any social programs. Some few of these expenses can be justified by their value to our economy -- roads, for example, allow workers to arrive at their jobs. Education, as I said, ensures a future educated workforce for more complex jobs. But most social programs would be written off as unsound investments -- welfare doesn't help Halliburton any. A cheaper way to handle these problems may be to hire more police officers, so the devastatingly poor don't commit crime and scare off potential investment.

The problem here is, while the country may be richer, its citizenry are not. If you were in a bar with Bill Gates, you'd be a member of the richest bar in the world -- but that doesn't mean you're any richer or any better off. This kind of laissez faire economics almost always winds up concentrating wealth in the absolute elite. As it has here, in fact. In a free-market ideal, this wouldn't happen (companies would slash their profits to zero to lower their prices in the name of competition), but we don't actually live in a free-market ideal -- we don't have perfect competition, and we grow further and further away from that ideal as companies merge and competition decreases.

As it stands, though, we don't need to roll back all taxes. We're still -- or were -- one of the best investments in the world. Our economy was thought trustworthy, before Enron and etceteras (which is why Bush should have promised a full investigation and the harshest penalties against Ken Lay and the other dishonest CEOs), our borders were thought safe (before Bush incited the entire Muslim world into a rage against us), and our economy seemed to be growing (until, for example, computer companies outsourced their labor to India). We're still strong, but if we don't find a new industry only we can perform (biomedical research, drug development, weapons systems are a few of our only remaining strengths), there's no reason to believe our economy will do anything but decline, and no particular reason to invest in our country or, while we're still inflated relative to the rest of the world, buy our goods.

Right now the dollar is actually weaker than the euro, which gives us an advantage in trade -- we can sell our goods there for cheaper than they can sell their goods here, assuming they both cost the same in real value -- but that hasn't worked to our advantage yet. It probably won't for as long as the continent's this angry with our country.

Damn I ramble. So, yeah, taxing luxury goods is fairly pointless, given there's no pressing need for anyone to actually buy them, and if they're bought we're at least assured money is being traded to lower classes, which are more likely to invest them domestically, and we know that money's not going to foreign countries to strengthen their economies against ours.

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(before Bush incited the entire Muslim world into a rage against us),

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