Here's my response, posted just now:
I understand the argument that it is unfair that a person with a higher income is made to pay more taxes under the progressive income taxing scheme, but this is a highly individualistic view. I prefer the more society-wide, utilitarian view.
Socioeconomic inequality has deleterious effects upon any society. In its most extreme form, it has resulted in the French and Russian revolutions. As you see from the concepts in America at Risk, the gulf of income differences between the rich and poor has been widening. Even Warren Buffet, a legendary investor, believes that taxes should be progressive:
http://www.youtube.com/watch?v=Cu5B-2LoC4s
Warren Buffet believes that he is being taxed too little, compared to his household staff. He pays 17.7%, and the average percentage paid by his staff is 32.9%. He is also critical of people making millions upon millions who pay at a lower tax rate, much in the same way he does. This is evidence that the taxation system in the US is, in fact, a regressive tax scheme.
About the taxes skipped by the poor and by illegal immigrants, this amount is relatively insignificant. According to the US Census, "Income, Poverty and Health Insurance in the United States: 2008", on page 16, "In 2008, the share of aggregate income received by the lowest quintile was 3.4 percent;... and for the highest quintile, it was 50.0 percent". 3.4% is a small percentage compared to the how much the top quintile makes. Even if we were able to get all of them to pay taxes, we wouldn't be able to get much from them.
US Census - http://www.census.gov/hhes/www/income/reports.html
The taxes skipped by large corporations through the use of loopholes, such as tax shelters on the Cayman Islands, Switzerland, or paying rent to itself, are much more significant than taxes skipped by the poor and by illegal immigrants. The Washington Post quotes the US Treasury as having stated that it loses 100 billion dollars a year to this practice.
About sales tax, while it seems to be a flat tax, it is actually regressive, according to my economics professor.
A poor person will tend to purchase things which are cheaper. Cheaper goods tend to be of lower quality, often wearing out more quickly than higher quality goods. This may lead to higher expenses overall for the same type of good as they repair or purchase them anew.
I also have a personal anecdote which serves to illustrate the concept. I bike to school, so I have purchase and regularly make use of bicycles. My first bicycle was about 115 USD from Walmart. Over two years, I've gotten the tubes replaced several times, which might bump the overall cost to about 140 USD. My second bike was about 130 USD from Bike Discounters(now defunct). I've had the tubes replaced several times on that one as well, plus new tyres, which might add up to about 190 USD over two years. I stopped using both of them because of an unfixable problem with the pedals.
My latest bike was 80 USD from Walmart, which I thought was a real bargain. This turned out to be a big mistake. I got this bike this past July, and I suffered from flat tyres constantly. Even when I patched and replaced the tubes, the flat tyres just kept occurring. I had the tyres replaced at Campus Bicycle during the winter, which cost about 90 USD altogether. This adds up to 170 USD already, and it hasn't even been one year. Plus, it's already suffering from the same pedal problem which afflicted my two previous bikes. I believe I will be replacing it soon. This means that the cheapest bike was actually the most expensive, considering how much I've spent on it over time.
If I recall correctly, Nickeled and Dimed might provide more detailed insight into the plight of the working poor. I read it in 2004 when I went to Buffalo. Copies are also available in the bookstore, downstairs in the library.
As for the government taking over industries in socialist countries, we should look to Europe as an example of where this is not happening. Whereas many public goods are provided by the government, such as healthcare and rail service, they still have private corporations. I'm sure you've heard of BP(UK), Nokia(Finland), and Nestlé(Switzerland), among others:
http://money.cnn.com/magazines/fortune/mostadmired/2010/regions/index.html
Also, having the government control certain industries may lead to a better overall result. I was arguing with my economics professor about whether or not socialised healthcare had any merit, so I took a look at some statistics from the World Health Organisation. Here is the text of the e-mail:
I took a look at the WHO's statistics and saw some interesting things. Here're the countries I'm comparing against:
Canada
Finland
France
Japan
Sweden
Switzerland
United Kingdom
I've also attached the data specifically for these countries in an Excel spreadsheet.
In "1. Mortality and burden of disease", the US is worse than all selected countries in terms of life expectancy, neonatal mortality rate, infant mortality rate, under-5 mortality rate, and adult mortality rate.
In "2. Cause-specific mortality and morbidity", the US is worse than the most of the others in maternal mortality ratio, non-communicable diseases, cardiovascular diseases, and injuries. Canada is not much worse in terms of deaths by cancer.
In "6. Health workforce, infrastructure, essential medicines", the US is not the best nor worst in most regards, except the number of hospital beds in proportion to population. It is interesting that Canada and the United Kingdom are able to achieve lower mortality rates("1. Mortality and burden of disease") than the US, although they have fewer physicians relative to the population. For some odd reason, we have more dentists than everyone else.
In "7. Health expenditure", the US spends significantly more than the other countries per capita. It is interesting that the US spends more while achieving worse overall results than the other nations, as indicated most strongly in the adult mortality rate("1. Mortality and burden of disease").
In "9. Demographic and socioeconomic statistics", two things that caught my eye were the huge adolescent fertility rate of the US relative to the other countries, and the fact that the average gross income per capita in the US is greater than those of the other countries. It's also interesting that the median age in the US is lower than that of the other countries.
All data is from the "World Health Statistics 2009", from the World Health Organization.
http://www.who.int/whosis/en/index.html
http://www.who.int/whosis/whostat/EN_WHS09_Tables.xls
I would use this to argue that capitalism, as it is realised in the United States, is not an economic panacea. It is a system, an idea, a tool, to be used in conjunction with other such ideas. In Europe, they are able to use socialised healthcare to spend less money while achieving better results than the US.
I would also like to emphasise that I am not advocating that the government take control of all industries, only those which provide infrastructure and critical services. This includes healthcare, transport, utilities, waste, perhaps even internet. As we can see in Europe, it is possible to have some industries which are heavily government-run without sliding towards a planned economy like that of the Soviet Union.
Besides, you're living through some of the failures of US capitalism. You've seen the housing market collapse, plus the fall of Enron, our huge debt to China, the millions of uninsured, unemployed, and impoverished(39.8mil, page 20 Income, Poverty and Health Insurance in the United States: 2008). To say that there is nothing better than what we already have is to be like Dr.Pangloss, who was fatally optimistic even as disaster befell him.
The founding fathers of the United States could not have foreseen all these things happening, and this is why we must debate these issues facing us now. We must realise the faults in the system to repair them. We must also see where people are doing better than the US, and learn from them.
One other thing, it's not only the poor on handouts who might feel entitled to things. Take Goldman Sachs, for example:
http://money.cnn.com/2009/07/17/news/companies/goldman_sachs_tarp_ingratitude.fortune/index.htm