What if you bought shares of a company or mutual fund on a monthly or quarterly basis over, say 20 years? Wouldn’t it be quite complicated to look up and apply inflation factors for each purchase? I’m not saying this isn’t a fairer way to do it, but it’s certainly more difficult.
And also the same issue for re-invested dividends.
Of course, most people have these calculations done by their brokerage and calculating capital gains without the broker’s help is a nightmare even without inflation adjustments.
The real issue I see with any attempt to adjust for inflation is that the devil is in the details. The ACA penalties in current US tax law are a great example. For a concept like “Get insurance or pay a 1% penalty” you have 100* pages of details, interpretations, exceptions, provisions and alternatives. It COULD have been implemented very simply, but that’s now how they decided to do it.
*Normally a number like this is a hyperbole. In this case, I’m sure it is much MORE than 100 pages, maybe by a couple factors of ten.
I’m not sure it’s been touched on yet, but in addition to de-incentivizing short term investing, giving preferential treatment to long-term investments is a legitimate function of a government that has a vested interest in the long-term financial welfare of a population to which it has promised retirement income. (And if Social Security were to evaporate on the wind, there would be even more incentive for the government to encourage long-term financial planning).
I just reconstructed the basis of stock purchased in 1983, with dividends reinvested. Adding in inflation would just take another column in the spreadsheet and a minute to fill it in.
But yes, anything purchased recently though a broker would be tracked.
dracoi’s point about government being government is well taken.
Regarding long-term mutual fund investors losing money: managed funds are a scam. There is no evidence that they beat index funds over the long haul, and they absolutely incur more costs.
The managers’ fees are one such cost.
Another cost (to relate this to the OP) is the increased bite of capital gains taxes - when you actively trade stocks you’re more likely to be paying the short term capital gains rate than lower long term rate.
Nowadays you can’t write in “various” on these anyway. This year each one was a different transaction requiring a different math problem.
But your brokerage and tax or tax software can pretty easily program a solution to this problem. In 1980 this would have been onerous. In 2015, it really is a pretty simple programming problem.