In presidential campaigns of the past, out-of-the-mainstream candidates Jerry Brown on the left and Steve Forbes on the right had unexpected moments in the sun, largely due to their promotion of some variant of a flat tax. If Obama wants to do something bold with U.S. economic policy, this could be a real opportunity.
The key thing about some version of a flat tax isn't the flatness per se, it's the elimination of tax breaks (i.e. deductions).
Tax breaks are what make ostensibly more progressive schemes (like the current one) actually less progressive, because they provide so many ways for the wealthy to pay a lower effective rate than the non-wealthy.
Tax breaks are perhaps the biggest driver of corruption in our system, as so many lobbyist efforts and campaign dollars are ultimately targeted at getting preferential tax treatment for some company or industry.
Tax breaks are what make people (correctly) think our system is fundamentally unfair, as it is filled with loopholes for those of means.
So let's say personal income tax was a flat 15%, with, say, the first $20,000 of income not taxed at all. (The actual figure of how much would not be taxed is a variable I'll get back to, but for now, I'm just using this for illustration.) No deductions. And let's similarly make the corporate tax rate also a flat 15%, but taxed from dollar one, where corporations would pay that tax on all income except they would not pay income tax on money paid out to employees, contractors, or stockholders (all of whom would get W2 or 1099 forms and pay tax on that money themselves); and the companies would not pay income tax on money paid out to suppliers for inventory that they either sell or incorporate into the manufacturing of an item that they sell. No other business deductions.
Deduction elimination sounds conceptually painful for many people and companies, but if you only pay 15%, deductions are not "worth" so much anyway. It is ultimately a good trade-off for creating a more fair and less corrupt (and corruptible) system; and it is still somewhat progressive, arguably more than today's system once you factor in deductions, since income below a certain threshold is not taxed at all.
For now, the amount of income that is not taxed (which I arbitrarily pegged at $20k above) could be adjusted to whatever number makes the system revenue-neutral with the current scheme... because the only plans of ANY type that could possibly get Republican support today must be revenue-neutral on the income side. In the future, since there are no deductions or subsidies to play with and no "loopholes" to close, the only ways to adjust the plan are simply to alter the level at which tax kicks in, alter the 15% to some other figure, or at some future date, perhaps add a surtax on personal incomes over $250k or whatever. But no matter what, a great step will have been taken toward a more fair and less corrupt system. That might not have been Obama's initial goal in these negotiations, but it would be a very positive outcome.
It is an idea that has been shown to be popular with democrats, republicans, and voters. Republicans even get a version of their wish to tax all corporate income at the 15% capital gains rate. Of course they would rather not give up deductions to get it, but it is a negotiation after all. If it were revenue neutral, it would be a tough policy to argue against. It doesn't immediately solve the problem of adjusting revenues and expenditures, but the two parties are too far apart to properly address that anyway, and in the future, at least it could be adjusted from a more comprehensible, more fair, and less corrupt system from the start.
