As corporations "downsize" via workforce reductions the effected employees normally receive "severance pay" by signing a "separation agreement". I propose that this severance should not be subject to Federal (or state) income tax.
Rational:
1. The payment is subject to signing a "separation agreement" I.E. "won't sue". So is more a settlement that income.
2. The payment usually put the employee in a higher tax bracket which amplifies the burden of the income tax. Given today's job market the employee will need that money survive.
3. Failure to make this money "tax free" will likely result in additional home foreclosures.