NICK Clegg called for a "rewiring" of the system as he pressed the Government to offer tax breaks to millions.
The Liberal Democrat leader also reiterated his backing for a controversial mansion tax as he urged the Treasury to accelerate plans to make the first £10,000 earned tax free.
It has been suggested such a move might save Scots taxpayers £500 a year. However, the Deputy Prime Minister was forced to admit he was setting out ideas rather than Government policy.
In a move designed to set clear blue water between his party and the Tories, he also challenged his Coalition partners on the issue, saying every politician had a choice to back either the interests of the many or those of the "wealthy few".
Mr Clegg is pushing for George Osborne to introduce a £10,000 personal income tax allowance much more swiftly than originally planned.
The LibDem leader is lobbying the Chancellor in the run-up to the March Budget, and a source close to the Deputy Prime Minister said that the timetable of 2015 "just won't cut it anymore".
Mr Clegg said many families were now facing a "state of emergency" in their finances.
He added: "Every politician now has a simple choice: Do you support a tax system that rewards the hard-working many? Or do you back taxes that favour the wealthy few?
"The tax system cannot go on like this, with those at the top claiming the reliefs, enjoying the allowances, paying other people to find the loopholes, while everyone else pays through the nose."
He also emphasised his belief in fairness for middle earners, in a move widely seen as a bid to position himself as the champion of the "squeezed middle" that Labour leader Ed Miliband often refers to.
Raising the personal allowance was a commitment in the LibDem manifesto ahead of the General Election. The first increase from £6475 to £7475 was announced in the 2010 Budget. In April the allowance is set to rise again, to £8105.
However, in his speech to the Resolution Foundation think-tank, Mr Clegg said he wanted the Coalition to "go further and faster" in delivering the full £10,000 allowance because "the pressure on family finances is reaching boiling point".
He said: "Household budgets are approaching a state of emergency, and the Government needs a rapid response."
He also said he would continue to press for a mansion tax that would impose a levy on properties valued at more than £2 million.
Mr Clegg said: "Who honestly believes it is right an oligarch pays just double the council tax of an average homeowner even if their house is worth 100 times as much?"
He also claimed the public looked to the Liberal Democrats to keep the Coalition "anchored in the centre ground".
Mr Cameron's official spokesman said decisions on tax would be made in the Budget in March, and said negotiations on its contents had not yet begun.
He added of Mr Clegg: "He is the Deputy Prime Minister, so he speaks as the Deputy Prime Minister. But decisions on tax are taken in the normal way at Budget time and there is a process that leads up to the Budget."
Labour leader Ed Miliband accused Mr Clegg of "finally" waking up to the problems of those on middle incomes. "It is this Government that put up VAT, this Government that is cutting tax credits and this Government allowing energy companies to rip people off on their bills," he said.
Neil Whyte, tax partner with PKF accountants and business advisers, said: "While raising the tax threshold to £10,000 could potentially benefit Scottish taxpayers with a potential annual saving up to £500 per person, the question will be; how are we going to pay for it?"
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