The reason we don't tax those people is because their paying taxes would actually hurt the economy. The revenue raised from those taxes wouldn't be enough to matter, and those taxed would have even less to spend then they do now. It would just be bad economics to tax these people all around.
But, more importantly, federal tax rates are not the issue. Not of the 99%, not of the 1%. The issue, if we're ever really going to make a dent towards fixing this mess, is government spending.
I agree entirely with your first paragraph, but I'm not certain of the next, as follows:
We need to downsize this massive bureaucracy.
I'm not so sure that's possible with the size of our nation. The federal government has to serve over 300 million people and manage a territory that covers half a continent. They've dealt with the territory a long time, but the population keeps growing and growing. A big ship needs a big crew. It's a matter of having enough staff to do the work.
I agree that the bureaucracy can be streamlined tremendously. There are lots of extraneous and redundant layers of agencies and departments. But many people think reducing complexity and bulk of government means reducing the size of it via staff reduction and funding cuts. I don't agree with that. The job is too big. It needs to be done more efficiently, but I don't see how it can be made much smaller.
We need to stop spending on foreign aid like it's going out of style.
As was pointed out, foreign aid accounts for only a tiny fraction of spending. Complaints about foreign aid are a common talking point of the small-government right and libertarian factions, but in fact, not only is such spending trivial compared to other areas of government, but it is one that delivers benefits in terms of national security and the global economy, so cutting it would be counterproductive.
Here's an interesting article from FactCheck.org taking a look at US federal spending:
http://www.factcheck.org/2011/07/fiscal-factcheck/
According to this article, the three biggest areas of spending, aside from "everything else" -- and I don't really see how you make a dent in that one; I mean, the government
needs paper clips, you know -- are defense, Social Security and Medicare.
Now rightwingers love to yell that we must do away with Social Security and Medicare, but I ask them, what are we going to do with all these old people? We do get more of them every day, you know. I don't see how Social Security and Medicare can be reduced much at least until the Baby Boomers are all dead.
So that leaves defense spending - military and national security. Most of us here will agree that we don't need to be spending a full 20.1% percent of our GDP on pointless wars and unconstitutionally invasive "security." But you know who wouldn't agree with that? The military industrial complex who make trillions on that shit every year and who own so many elected officials. That's a nice big problem we have to fix before we can accomplish anything worthwhile.
So what's the solution then? To cut government spending we do need because it's too difficult to cut spending we don't need? Where and what to cut does make a big difference.
We need to get clean in terms of our addiction to oil and fossil fuels.
I also agree completely with this, but we run into the same problem as with cutting defense spending. Also, there's the principle of "you have to spend money to make money." R&D is still needed to develop the new energy tech to replace oil and gas over a period of years. Who can be made more motivated to spend that money to get us out of the costly fossil fuels hole and onto a less expensive sustainable/renewable road than the not-for-profit government?
Even if Obama had his way and the Buffett Rule was passed (and it was a version of the Buffet Rule that actually taxed the top 1%, not the version that got voted down by the house a couple weeks ago), it wouldn't even cover a quarter of our national deficit. That's not a political statement, that's an economic statement. I consider myself very liberal, but there's just no way around this issue. We need to stop spending like we're a rich nation, federally speaking. We're literally trillions of dollars in debt.
The UK is following that road, and they just slipped into a double-dip recession. Greece followed that road, too, and look at them. Look at Spain, Ireland, and several other European nations. Government debt is not like personal debt, and when we are in trouble is not the time to stop spending.