I'm going to be that guy and just say that one of the many many harmful side effects of income taxes is the kind of social engineering power it gives politicians, who are neither qualified nor properly motivated to make good decisions with such tools. Income taxes are an unethical pollution to our society and government.
In principle, I do not think the income tax should be replaced by anything at all. Most federal spending is either unnecessary or actively harmful. But practically speaking, I'd suggest a federal sales tax combined with a Universal Basic Income subsidy to all citizens (e.g., everyone gets a check for $X every month). The subsidy would cover the increase in prices for anyone below a certain income level - it would effectively produce a progressive tax structure without the privacy infringement. There would be no loopholes or exemptions to think about either.
What do you propose instead?