Back in college I worked at a restaraunt. The dishwasher there was a nice guy, and a good worker. Not a rocket scientist. He'd been working there a very long time. He'd been turning down raises for a decade, not because he wanted less money, but because it would put him above some arbitrary line that allowed him to have low rent housing. That's the kind of sillyness that 'step' based systems encourage, whether they be in assistance programs or part of the tax code.
One thing that never seems to get much mention is that you can have a "simple" progressive tax. I think people very much like the idea of a flat tax because it seems simple and fair. I also think the "skin in the game" argument has merit. There is no reason we can't do something reasonable like say 5% of income at the bottom, XX% at the top, and a nice smooth line between those two whose equation calculates your taxes. Screw deductions. You pay on your real income. No loop holes, the super rich don't get off, everyone has stake (and a reason to pay attention to gov't efficienty), and it's simple. If people can't afford to pay 5% in taxes, then jack the mimimum wage to a reasonable level. The money comes from somewhere anyway, paid to the government or paid to workers. The mechanisms for the payments are very important even of the dollars in your pocket remains the same.
It seems absurd to me that with capital gains you are taxed less than someone who actually had to earn that money. It seems equally absurd that 50% of americans don't pay any taxes at all, and a good chunk of those actually get money back.
When you have to depend on the goverment just to make ends meet, that is a very, very bad thing. And that is what 50%+ of us do.