A flat tax would work, but then the people who are currently under paid would have to get a pay raise equivalent to what they are going to be paying in extra income tax or else those people will take a huge it, may lose their house, car, etc etc, so that needs to be taken into account.
To say that people are underpaid is a whole different issue. Some people make little money because they have jobs which pay very little....this is not the same as being underpaid. Underpaid is when you have a job which normally pays what the market and competition dictates, but you are paid less than that for various reasons. If you are a resident MD making minimum wage, you are probably underpaid. If you pump gas and make minimum wage, you are not underpaid, you just have a low paying job.
Truly, what do these people pay in taxes now? Are they using tax "loopholes" to avoid paying taxes. The lowest tax bracket is 10% for single filers with an income income of $0 – $8,500, married filing joint with and income of $0 – $17,000 and head of household with an income of $0 – $12,150.
I could be wrong, but folks at this income level are probably on public assistance. It is very unlikely they are buying a house and perhaps not even a car worth keeping. Here's a scenario for you, if the flat tax were, say 10% for all, a couple making $17,000 a year with no deductions of any kind would owe $1700 in taxes. Chances are they work for an employer where taxes are taken out each time one is paid. So if they are paid once a month and they both earn the same amount of $8,500 annually, they each would have only $70.80 per month in federal taxes deducted.
On the otherhand, someone making $75,000 a year would pay at 10% flat tax $7,500 a year. Someone making $200,000 would pay $20,000 and someone making a million would pay $100,000.
I don't know what the tax rate would need to be if we were to go with a flat tax to keep it revenue neutral.
Some people feel a better tax is "fair tax" which does not tax income at all, but rather only goods and services (consumption or sales tax). This would replace our current system of income tax. Obviously, there are no "loopholes" with this method of taxation.