All taxes have problems. Each are "unfair" in a different way. I'll briefly list the main forms of taxation. PC Surgeon, please comment on these.
1) Tax the users. Want to drive on streets paid for the government? Sure, but pay a gas tax or toll or similar tax each time you drive. This has the benefit of taxing those people who truely gain from the government project. Want to use government land and government cleaned toilets for a campground? Sure, just pay a small fee when you enter the park. It sounds good at first. But then how do you fairly tax things like national security? Or what if you don't drive but still you benefit from goods being shipped to your city on public roads, how is that taxed fairly? Even if you could tax every single event, imagine the massive headache and government payroll necessary to collect all of these taxes $1 at a time.
2) Tax the buyers. The common sales tax. It sounds good at first. But, you really have to delve into the details to see that sales tax has problems too. First of all, people like Warren Buffet spend about 1% of what they make. So, even with a 20% sales tax, Warren Buffet's tax rate would be 0.2%. And if Mr. Buffet chose to spend some of his money out of the country, that 0.2% rate would be even smaller. Poor people, on the other hand, who spend everything they earn would pay the full 20% rate. That just isn't feasible to shift so much of the tax burden from the wealthy to the poor. Yes, there are "fixes" such as massively increasing government welfare to the poor (the "fair tax" plan gives the poor massive monthly checks). Not only is that the biggest welfare plan ever conceived, but it also means the rich AND the poor pay little to no tax. That means that you and I, the middle class, must pay it ALL. Realistically it wouldn't be feasible with 20% sales tax - despite the "fair tax" claims. Think more like 50% or even higher if this plan harms the economy. Not to mention the massive black-market or barter-markets that easilly could be generated to circumvent the sales tax.
3) Tax the income. Income taxes have the benefit of being quite flexible (ie you can tax rich or poor any way you like) and relatively easy to double-check. The employeer and the employee both report the income, making it much more difficult to circumvent. Its flexibility however will always be disputed. Should the tax be higher or lower for the high income earners? What about the low income earners, higher or lower? I think you know the disputes. Plus, it taxes you on your way to being wealthy and not necessarilly the wealthy people themselves. Someone like Bill Gates could theoretically have no income and never be taxed, nor will his children or any of their offspring since they have enough money to live without any income. Or you could have a high income and be poor (say if you had massive debt or many kids, etc) yet you are taxed heavilly.
4) Tax the wealth. This has the benefit of going right to the source of the money. People who have money pay taxes. This is different than taxing income - it is taxing the people who really have stuff of value. It taxes the people who are least harmed by the tax and doesn't tax those who would be harmed most by the tax. A property tax is a wealth tax. If you have a million dollar home or priceless artwork or a fancy yacht or a massive trust then you are taxed on that wealth. This is taxing the Bill Gate's of the world, the Rochefellers, the Hilton sisters, etc. Honestly, I think this is one of the best forms of tax. If you have a lot of stuff, you pay a lot of taxes. If you have nothing, you pay no taxes. Your aren't harmed for success (such as with an income tax), you instead are taxed for excess. You can't easilly hide a 401k or a house from the IRS. Nor can you easilly create a black market for them. Nor will this tax harm spending like a sales tax would. Nor does it require a tax man at every step you take that might benefit you.
4b) Tax the wealth but only once the wealthy have died. Estate tax. This is a variation of #4. Enough said.
I think the fairest, least harmful tax, the easiest to verify, and the most difficult to hide illegally is the wealth tax (such as a property tax). The key is to keep the wealth tax rates appropriate. You don't want to heavilly tax someone who lives in a shack just because he owns a 50 sq ft piece of property.
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