"Proof of previous income" was required at one place I applied years back, and I've heard similar stories from colleagues. No, of course, I don't bother going forward in those situations.
"What are you making now?" is crass. The good recruiters I've worked with phrased it as "what are your salary expectations?" or "the range is $x-$y - are you OK with that?"
I've taken it literally in situations where they actually meant it literally. "We will not pay you $80k until you can prove you were making $80k at your previous job". Insane, but it does happen on occasion. How those companies ever manage to hire anyone... I'm not sure.