A reminder that taxes don't fund the government they curb inflation. The government funds itself by printing money and taking out loans.
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Sort of. Modern monetary theory ignores any stocks of money or money-like instruments at the government, focussing instead on flows. Spending and paying debt is inflationary, taxing and issuing debt deflationary.
As an economic model it’s nice. As a policy framework in a democracy it’s nonsense. Practically nobody during the inflation scare proposed raising taxes to destroy cash.
They did though, they just don't call it that because it's implicit in the existing tax system and happens without any legislative action.
Capital gains tax includes a tax on inflation. If you own a $100 asset and its real value doesn't change but you have 10% inflation, its nominal value is now $110 and the next time you do a transaction the government will call this a $10 capital gain and collect tax on it, even though the real gain was $0.
which is fine, except that it's a huge administrative headache, as inflation is not constantly measured, and you will have to estimate it for periods where it's not known. Not to mention that it takes a lot more effort to do this.
Simply discounting capital gains tax is sufficient as a simplification.
The BLS publishes the inflation numbers monthly. Higher granularity than that is negligible and hardly even measurable; the main issue is when you hold something for many years and the rate of inflation is in the double or triple digits.
Also, this stuff is already being done by computers. The computer needs the dates to determine if it's a short-term or long-term capital gain so it can use them to calculate the inflation using the official numbers.
> Simply discounting capital gains tax is sufficient as a simplification.
The difference is enormous. If you hold something for 18 months and the inflation was 6%, you get the same discount as if you hold it for 50 years and the inflation was 600%.