Because that’s how the law is written.
Now for *why* it’s written that way – the tax laws are intended to raise revenue, so there’s incentive to minimize deductions and maximize rates.
The cap on deductions also discourages massive “tax loss harvesting” during down years in the market. We’ve all lost 25% this year, but there’s no real tax reason to sell everything to lock in the losses for 2022.
If you could carry over and write off enormous losses, wealthy people would be on a selling spree right now.
Trickle down economics. We got told that if big corporations got tax breaks and we taxed the majority of the working class instead, we would feel the benefits of their economic growth as it trickled down to us. We were told that if we didn’t strike, we would be rewarded because the company wouldn’t lose money. We built the tax system to help keep the rich even richer and the poor even poorer.
It’s treated like gambling. If your losses equal your gains, you can deduct any losses to the point of your gains. If you keep losing, you may have a problem.
Because governments can do whatever they want, but if they want their country to work they need to tax money from some sources to offset the spending they necessarily engage in to maintain their monopoly on violence, without which all of human civilization would collapse. So sometimes, some governments engage in some responsible governance and try to levy taxes in a way that distorts the growth of society in the least offensive way possible, and sometimes that means laying into the people who have gained the most from that society. They don’t have to, they can do whatever they want, laws are all made up by people who have power to do whatever they want, nothing is real
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