just to clarify, medicare, payroll taxes, sales tax, local taxes, gas taxes, etc aren't skin in the game?
No, they are not the same game.
A married couple with 2 children is entitled to a standard deduction of $11,900 and 4 personal exemptions of $3,800 for 2012. That means they will not owe one penny of income tax until their income exceeds $27,100. But then they have $2,000 of tax credits available for having 2 children. Thus, they will not pay any income tax on their next $17,400 of income that would ordinarily be taxed at 10%, and they have an additional $5,200 of income that would be taxed at 15% that will also escape any income tax.
Using mathematics that is incomprehensible to the average Obama voter, I come up with $49,700 of income for this family of 4 before they have to worry about income taxes. If they itemize their deductions and/or qualify for other tax credits, like childcare expenses, their tax free income can get even higher. And what happens if this same family has $70,700 of long-term capital gains? They will owe zero income tax since the long-term capital gain tax rates for those in the 10% and 15% marginal tax brackets is 0%.
I hardly think it is fair that a family of 4 has the potential to pay zero income tax on income in excess of $120,400, but when the stars align properly it is possible. How's that for no skin in the game?