Imagine the risk of not being able to diversify your portfolio and putting all dependency on one income source. How do layoffs, broken health/major sickness, automation, local downturns get compensated by reducing future taxes? If I'm laid off for a year, then find a new job, I still pay the full tax amount on my income from that point forward, no 'loss deduction' from a year being unemployed. If I get sick with cancer and miss years of work then return, I still pay the full tax amount on my income.
I agree with you that it is unfair that people with variable income pay more taxes than people with steady income even if average income is the same. I’m a poster child for people disadvantaged in this way.
That said, I do recognize that mitigating this is really hard without introducing even more complexity to the tax code, which has its own cost.
Wages have no risk when you receive them. It is cash on the barrel. The only risk is counter-party such as your employer going bankrupt before you receive your paycheck. Not zero but statistically very low. Any inflation that happens after receiving wages is on the individual to the extent no one requires them to eat that inflation. (This is an issue during hyperinflation but the is very far from that.)
It was to point out, that giving asset sales an insurance break, or risk break, would only makes sense if we gave working people gapped-income and risk breaks.
Which is to say, that neither makes sense.
The way I would put it is, money inflates if you simply hold it, but it has time value almost always greater than inflation. If you don't at least do that, you are choosing to waste value.
So giving a tax break for inflation would be giving people a break on losses, that capitalism already accounts for. Such as naturally higher interest rates when inflation is higher.
(Yes return on asset balancing mechanisms are not perfect in time, but as noted, neither is employment.)
Seems like it'd be relatively easy to allow one to 'smooth' their income over multiple years. Imagine paying 100 income at 40% tax year 1 and 0 income year 2. A scheme where you could retcon things to be 50, 50, each at say 30% for a 10k refund (or at least credit) seems very doable.
