What should be done to reduce income inequality?

Yeah... I understand marginal tax brackets, and also the effective tax rate that people actually pay, the one thing you seem to be ignoring here. I even showed a graph from the CBO that showed the effective federal tax rate that people, on average, actually pay. Your groupings of classes (poor, lower, middle, and rich) don't illustrate anything, they don't reveal any tax brackets information at all, especially since you seem to be pulling tax rate numbers out of thin air. There is a difference between marginal tax and the effective tax.

Where are you getting this idea that the lower and middle class individuals are paying 30-40% tax rate? They don't. As the CBO graph showed, the effective tax rate for the lower and middle class are below 10%, and even the middle quintile is hovering around 11%. No matter how many times you wish to say that a flat tax would reduce the tax burden, it wouldn't; in fact, it would actually increase the tax burden.

Then please, explain.

@StrifeDelivery: what about when you figure in state, local, and SS taxes? It definitly feels like 40% but I haven't calculated it

Well yes, those taxes exist. The majority of states have their own form of income tax rates (the majority having a progressive tax), but they are relatively small compared to the federal tax rate. Local taxes generally consist of property taxes and local sales tax rates. SS is a given. It's misleading to lump all those taxes together when the topic is on federal income tax. That is what is currently being discussed: flat tax vs. progressive tax of income at the federal level.

@StrifeDelivery: my local tax and state tax are almost the same I figure at about 3% each out of my pay. Federal seems to be 18%. I am not expert this is just crunching numbers on my YTD. By local I mean the city that I work in btw not live in.

Right right. But regardless if we moved to a flat tax or not, the state and local taxes would still have to exist in order to fund the states and the local counties. But what I've been trying to tell slate, is that if we moved to a flat tax of 10% for federal income tax, the lower and middle classes would pay more. I posted a graph earlier that showed the average effective federal income tax rate, divided by income groups. Basically, the graph showed that the lowest 40% pay below 10%, and that the middle quintile pay about 11%.

Oh yes, this should be good.

@StrifeDelivery: man I am getting ripped off then lol. Even with a refund it averages to like 15%

Well it is the average, and it is dependent on what your income range is. But also, more importantly, it does take into account the various deductions that are at people's disposal. So perhaps you're just higher than the average, perhaps you're not in the right income range, or perhaps there are a few more deductions you could try to squeeze out.

I looked at that graph, and am basically around the 3rd bracket, and pay a hell of a lot more (effective) than 10%. That's after taking all the deductions I can, and I do 401K stuff to lower my overall tax burden. Actually I just went through my email for my 2013 returns and my effective tax rate was WAY over 10%...

I'm not sure what that graph is trying to actually represent, but there's no way people in middle class brackets are paying 10% effective rates on federal taxes.

*edit*

Ah I think I see what's going on here...I read those as tax brackets but it's the quintiles I think as shown here:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=330

So just FYI, the 3rd quintile basically tops off at 60K household...which honestly is barely middle class at all IMO and has a mean (the average) of 50K a year for the household.

So uh, yeah, I'm not in that group lol which is why I pay a hell of a lot more in taxes.

Simple everyone should receive same pay or drop the prices on shit

Sure, if the point was to provide guaranteed income in the short term; however, that is not the point of granting options.

You do so to tie actual performance of the company to reward. Options are not shares; they are an opportunity to buy shares at a future point in time at a prescribed price and they are worthless unless the stock price rises. So you are encouraging people to contribute to the actual longer term financial success of the company, as opposed to getting paid just for performing tasks.

And you do so to encourage people to stay with the company as part of a long term value proposition (i.e, Talent Retention) as part of what is commonly referred to as LTIP for long term incentive plan.

These reasons are completely different than paying people for short term transactional contributions aka your routine paycheque.

It's a wonder why folks don't refer back to the period when the gross economic disparity began. Prior to the 1970s, after the War, capital was very much regulated by the state; preventing corporate interests from taking part in capital flight. Capital stayed home so that jobs could stay home. This period is considered to be the golden age of economic growth, with the US having high rates of productivity while maintaining the institution of the social contract. That system was later dismantled in the 70s by Nixon and later, broken down even further by Regan. This dismantlement of capital regulation led to the then foreseeable outcomes that we're experiencing today; low productivity, extremely high profits for the corporations, stagnating wages for the workers and the option of capital flight when corporate interests can't have their way. Unregulated capital also allows corporate power to dictate prices of the essentials, such as healthcare, medicine, food and housing. Any attempt by the state to impose control not in favor of financial interests and big business simply pack their bags and leave, setting up shop in some third-world sweatshop.

I really don't know, frankly. I mean, every year on my tax returns I think to myself, "Hmmmm.... I wonder how I got that 23% effective tax rate?" and start looking into the summary sheet. The fact that most people never bother to ask that question is kind of foreign to me. I would think that, at some point, curiosity would get the better of them.