You make a very good point.

Maybe the solution then is to eliminate income tax altogether? We didn't have Federal income tax until 1913, and I am surprised at why we need to pay so much in Federal taxes when the state/local governments are the ones providing most of the services.

The federal government has other significant sources of income, and a large majority of the spending is definitely wasteful, it would start by eliminating most of the IRS/tax law/enforcement cost, before even starting to look at the rest.

Also of note is that the income tax was voted into law amid pretty non-democratic conditions, and now we assume it must be absolutely needed because we've become accustomed/dependent on it.

Non-democratic? After a quick a-Googlin', it seems like the income tax was made legal by the 16th Amendment, which has been properly ratified by 42 states.

My bad, I am confusing with the Federal Reserve Act, which was drafted in secret meetings and passed into law three days before Christmas. Yet, one cannot ignore that when the 16th amendment was passed, federal income tax was 2% and required 2/3 of the votes to pass, subsequent increases only required >50%. A 35% rate for middle class incomes is a far cry from 2%.

Also, to support my point regarding wastefulness, look at this article from the Washington Post that cite a report made that found that out of $1.3 trillion collected, $616B was found to be wasteful, that's 47%!

http://www.washingtontimes.com/news/2014/apr/14/editorial-wh...

This doesn't even start to look at the cost of foreign adventurism or the war on drugs, and all the programs to attempt repairing the damages caused by these efforts.

Can you elaborate on how personal income, capital gains, and perhaps estate taxes can't cover all scenarios?

How will assets and income be hidden in untaxed corporations?

LLCs allow owners to declare personal/corporate taxes under the same umbrella. Same for sole proprietorship and other structures.