This point could also be addressed by subtracting the increase due to inflation -- or even the risk-free rate of return, which one hopes is slightly higher than

This point could also be addressed by subtracting the increase due to inflation -- or even the risk-free rate of return, which one hopes is slightly higher than inflation -- from the amount to be taxed on, before multiplying by the tax rate. In a low-inflation environment this wouldn't make much difference, but in a high-inflation environment (like the 1970s) it would make quite a large difference.