The government should stop taxing severance pay for those who've been laid off/let go/lost job. With unemployment as high as it is, that money is needed for daily expenses.
Instead of taxing against someone who's just lost their means of living, levy a fine against the company doing the lay off/firing/etc... Whether it is a lump sum or equal to the amount to the amount of tax that would come from the person(s) laid off.